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  • Bill 141: Checklist on insurance products offered via the internet and distribution without a representative

    Download your checklist A major reform of the financial sector and, more specifically, of the standards surrounding the practice of professionals governed by the Autorité des marchés financiers (the “AMF”) is now applicable under the Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions1, formerly known as Bill 141. One of the main goals of this reform is to offer greater protection to consumers by providing a framework for online insurance product offers and for distribution without a representative. This framework is provided for in the Regulation respecting Alternative Distribution Methods (the “RADM”)2. Considering that 60 laws are amended by Bill 141, many of which apply to insurance firms3 and insurers4, it is important to be well informed of your key obligations in order to navigate through this transition. Here is what you need to know: The obligations of insurance firms for insurance products offered via the internet5 If you offer insurance products online, as of June 13, 2019, you must comply with the following: Information to be provided to the AMF Before offering a product online: The information about your “digital space” The information about the products you offer The insurers whose products are offered Annually: The number of insurance policies issued The amount of premiums written through your digital space The number of cases where clients cancelled their insurance contracts Information to be provided to the client: At all times: Make the means to interact with a representative of the firm visible The information must be presented in a clear, readable, specific and non misleading way Make readily accessible through your digital space: The name, contact details, sectors and AMF registration number of the firm The information on where the client can file a complaint and the summary of the complaint processing policy A specimen of the policy for each product offered and any available endorsement, if applicable6 Before a contract is entered into: The name and contact information of the insurer offering the product The product coverage, exclusions and limitations The warnings about the consequences of misrepresentation or concealment The premiums, and other fees and expenses, including applicable taxes The period of validity of the quote Immediately before a contract is entered into: The information collected from the client and the options and conditions the client has chosen As soon as a contract is entered into: Confirmation that the contract has been entered into and the temporary insurance, if applicable The right of rescission and the procedures for exercising it The way in which the policy will be provided to the client Obligations specific to the operation of the digital space: Ensure the proper operation and reliability of your digital space at all times Require an action from the client each time confirmation or consent is needed Detect and automatically suspend or terminate an action initiated on the digital space if the information provided may lead to an inappropriate result or the client does not meet the product eligibility criteria Enable the client to correct a mistake at any time prior to entering into a contract Where the firm offers an insurance of persons contract that is likely to replace another contract and is unable to proceed with the replacement through its digital space, the firm must interrupt such offer, and provide the information as it would have been done in the presence of a representative7 Suspend the action initiated through the digital space when no representative can interact immediately with a client who asks to interact with a representative Ensure that the information provided by the client is kept in a manner that ensures its confidentiality and security Prohibitions It is forbidden, through your digital space: To present advertising unrelated to the product offered To automatically make a choice for the client regarding the products offered To exclude or limit your liability to the client relating to the proper operation or reliability of your digital space or the accuracy of the information presented thereon Obligations of insurers for insurance products offered through a distributor8 A distributor is a person who, in pursuing activities in a field other than insurance, offers, as an accessory, for an insurer, an insurance product which relates solely to goods sold by the person or secures a client’s adhesion in respect of such an insurance product.9 Information to be provided to the AMF Before offering an insurance product through a distributor: A list of distributors10 A list of the contracts offered by a distributor, including a description of the insurance coverage provided by those contracts11 The hyperlink to access the distributor’s offer through the Internet The contact information of the insurer’s assistance service Annually, for each product offered through a distributor: The number of insurance policies and certificates issued and the amount of premiums written The number of claims and the amount of indemnities paid The number of rescissions and cancellations The remuneration paid to all distributors and third parties to which the insurer has entrusted the performance of the obligations of an insurer with respect to the distribution of a product through a distributor Documents and information to be provided to the client The notice of free choice The notice of specific consent The notice of rescission of an insurance contract The fact sheet The product summary12 As soon as a contract is entered into: A summary of the information collected from the client The policy, the insurance certificate or the temporary insurance Prohibitions With respect to replacement insurance for insured vehicles or insured parts and with respect to the life, health and employment insurance of a debtor or investor, no insurer may13: Enable the distributor to keep its remuneration within a time period not commensurate with the term of the product, which time period may not, however, be less than 180 days Pay to the distributor a bonus or a share in the profits based on contract experience Set different commission rates applicable to a distributor for products with similar insurance coverage Other changes effective June 13, 2020 For Internet offers you must: Make a specimen of the policy for each product offered and any available endorsement available on your digital space Adopt a procedure for the design, use and maintenance of your digital space and ensure its implementation For each insurance product offered by a distributor, the insurer must make available on its website: A specimen of the insurance policy or insurance certificate and any available endorsements The product summary14 For the offer of insurance products by a distributor, the insurer will have to: Adopt and implement procedures that enable the supervision and training of its distributors Provide training to its distributors covering the topics listed in the RADM Penalties Certain breaches of your obligations may have administrative and criminal consequences that may be imposed at the initiative of the AMF. The AMF has broad powers to carry out preventive inspections and inquiries to demonstrate that infractions have been committed. Consistent with the consumer protection objectives of Bill 141, the ARRFS now provides for greater protection for those who report an offence and much stiffer fines for those who obstruct inspections and inquiries. It should also be noted that certain contraventions of the ARDFPS or the RADM can lead to the cancellation or revocation of the firm’s registration. Administrative monetary penalties of up to $2,000,000 may also be imposed by the Financial Markets Administrative Tribunal. It is therefore essential that you be aware of and comply with your new obligations under the Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions.   S.Q. 2018, c. 23. CQLR, c. D-9.2, r. 16.1. The term "firm" is used for brevity, but the information in this bulletin also applies to independent partnerships. Most of these amendments can be found in the Insurers Act, CQLR, c. A-32.1 (the “IA”); this act replaces the Act respecting insurance, CQLR, c. I-21. A-32, the Act respecting the distribution of financial products and services, CQLR, c. D-9.2 (the “ARDFPS”), and the Act respecting the regulation of the financial sector, CQLR, c. E-6.1 (the “ARRFS”: the Act respecting the Autorité des marchés financiers, which has been renamed) Chapter II of the RADM mainly provides the framework applicable to insurance firms and insurers offering products online via a transactional website. This requirement is subject to a transitional period of one year ending June 12, 2020. In accordance with section 22 of the Regulation respecting the pursuit of activities as a representative (chapter D-9.2, r. 10.) Chapter III, of the RADM provides the framework applicable to insurers that offer their products through a distributor. ARDFPS, s. 408. The insurer must, without delay, inform the Authority of any change to this list. The insurer must, without delay, inform the Authority of any change to this list. The distribution guide filed with the AMF before June 13, 2019 can be used until June 12, 2020 and until then, delivery of the guide will be equivalent to the delivery of the summary and the fact sheet. In accordance with sections 424 and 426 of the ARDFPS, these insurance products are deemed to be insurance products which relate solely to goods. The distribution guide that can be used until June 12, 2020 must be currently accessible on the Insurer’s website.

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  • Judicial Review: impact of the Vavilov Judgment

    In Vavilov, the Supreme Court of Canada revised the applicable legal framework for the determination and application of the standard of judicial review of administrative decisions. Changes were made to the analytical framework for determining the applicable standard of review and clarification was provided as to how the standard of reasonableness should be applied. The objective was a more easily identifiable standard and diminished debate on the standard of review applicable to a given administrative matter. On December 19 and 20, 2019, the Supreme Court of Canada published three administrative judicial review decisions in the cases of Vavilov1, Bell Canada2 and Canada Post Corporation3. In the first case, which dealt with espionage, the majority set out a new approach to the judicial review of administrative decisions, with particular regard to the application of the reasonableness standard. The other two decisions similarly illustrate the application of these new principles. Determining the appropriate standard of review Presumption of reasonableness The new analytical framework includes a presumption that reasonableness is the applicable standard in all cases. Going forward, whenever a court reviews the merits of an administrative decision, it should begin with the presumption that the applicable standard of review for all aspects of that decision will be reasonableness. As a result, it is not necessary for courts to engage in a contextual analysis as there are no longer categories of questions for which the standard of review is not identified at the outset. Categories of questions subject to the correctness standard The categories of questions to which the standard of correctness applies remain essentially the same: Constitutional questions; Questions regarding the respective jurisdictional boundaries of the specialized tribunals; Questions of law of central importance to the legal system as a whole; more specifically, it is no longer necessary for the question submitted to be outside the area of expertise of the decision-maker; rather, it is sufficient that it is of central importance to the legal system as a whole. Category of jurisdictional questions “Jurisdictional questions”or “true questions of jurisdiction” are no longer questions for which the correctness standard must be applied. Although this is not a major change in itself, the Supreme Court has often stated that this type of question is exceptional. Now that the fate of these questions has been clarified, the standard of reasonableness applies. Cases where the law provides for a statutory appeal mechanism In cases where the law provides for an appeal of an administrative decision to a court of law4, counsel must now defer to the appellate standards of review, keeping in mind the nature of the question at hand (question of law, question of fact or question of mixed fact and law) as opposed to the standards of judicial review. Cases where the law specifies the applicable standard of review The presumption of reasonableness review can be rebutted where a legislature expressly outlines the standard of review applicable to a given administrative decision. In such cases, the standard determined by the legislature applies. Important Take Aways The Vavilov judgment marks a major shift in the state of the law of judicial review. For this reason, prior case law should be treated with caution. The situations in which the presumption of reasonableness review can be rebutted are limited to the five listed above: the three categories of questions where the application of the correctness standard is required, cases of appeal provided for by law, and cases in which the legislature has expressly specified the applicable standard. Nevertheless, the Supreme Court appears to have opened the door to subsequent recognition of new exceptions, albeit on an exceptional basis and in accordance with the analytical framework and principles set out in the decision. Applying the reasonableness standard – Moving forward In addition to revising the analytical framework for determining the applicable standard of review, the majority provides a series of clarifications and indications on how the standard of reasonableness should be applied, and refers to a “more robust form of reasonableness review.” It is important to follow future judgments of the Supreme Court (in addition to other lower courts) in order to accurately measure the impact of this new framework for applying the reasonableness standard. Our colleagues specialized in administrative law, labour law and litigation remain at your disposal for any questions that may arise.   Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65. Bell Canada v. Canada (Attorney General), 2019 SCC 66. Canada Post Corporation v. Canadian Union of Postal Workers For example, the appeal of certain decisions of the Administrative Tribunal of Québec to the Court of Québec.

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  • Can an Expert Report be Inadmissible for Bias as a Preliminary Stage? The Superior Court of Quebec decides

    The Code of Civil Procedure gives a party the ability to apply for the dismissal of an expert report as soon as it is disclosed by the adverse party. This process is governed by the courts. In the decision in Safran Nacelles v. Learjet inc.1, rendered in August 2019, the Superior Court granted an application to dismiss an expert report and excluded it even before the trial was held, after finding that its author did not have the requisite impartiality to enlighten the court. Facts In 2007, Bombardier Inc. (hereinafter “Bombardier”) retained the services of the plaintiffs, Safran Nacelles and Safran Landing Systems (hereinafter jointly referred to as “Safran”). Safran became a supplier of Bombardier in connection with the Learjet 85 program. In October 2015, Bombardier stated that it was forced to abandon its program, citing poor sales as the reason for doing so. However, Safran felt that the contracts, which were binding on the parties, had been terminated without cause and claimed damages. In 2018, in the context of the proceedings instituted by Safran, Bombardier filed an expert report in the court record which determined the reasons for the abandonment of the Learjet 85 program. In particular, the expert analyzed the market trends, reviewed Learjet sales, and compared them with the sales of competing products. However, the expert had been an employee of Bombardier since 2007 and was even the head of the market analysts team at Bombardier. Thus, his work had served as the basis for Bombardier’s decision to terminate the program. Decision Justice Thomas M. Davis, of the Superior Court, dismissed Bombardier’s expert report after stating the requirements of objectivity, impartiality and thoroughness associated with the expert’s work2. He also noted that the purpose of the expert’s report is to enable the trial judge to assess the technical, scientific or specialized aspects involved in the proceeding before him or her. The expertise should extend beyond matters within the knowledge and experience of the judge, without however taking the form of a legal opinion or pleading3. Where expert evidence does not meet these criteria, it can be rejected at the preliminary stage, but only in cases where the inadmissibility of the evidence is clear. While judge Davis acknowledged the great experience of Bombardier’s expert, he noted that this experience was acquired in the context of his job4. Furthermore, the judge also noted that the expert’s work was key to Bombardier’s decision to terminate the Learjet 85 program5. The expert was involved in the program, participated in presentations made to Bombardier’s suppliers, and would undoubtedly have to testify at trial as a witness to the facts. The judge concluded that he was [translation] "the main supplier of the information that enabled Bombardier's management to make its decision"6, making him an advocate for Bombardier’s position, and therefore biased. Noteworthy points of decision Since the current Code of Civil Procedure came into force on January 1, 2016, the debate on the admissibility of expert reports should normally take place prior to trial. Article 241 of the Code of Civil Procedure provides that a party may, at that stage, apply for the dismissal of the report on grounds of irregularity, substantial error or bias. However, whether an expert is biased is sometimes an issue that is difficult to resolve prior to trial. Both judges and lawyers have a tendency to leave this issue to the assessment of the judge on the merits and deal with it as a question of probative value. Therefore, there are few examples of situations, in the course of proceedings, that justify the dismissal of an expert report on grounds of bias. Judge Davis’s decision in the case of Safran Nacelles v. Learjet inc. is one of the most instructive. It is all the more interesting as it was rendered solely on the issue of bias, in the absence of any other form of irregularity in the report. For judge Davis, it was not the expert’s job with the defendant Bombardier that led to the dismissal of his report, but rather, the fact that his conclusions formed the very basis of the decision that was being attacked by Safran, i.e. the main issue in the debate between the parties. The judge’s reasons were consistent with two other decisions of the Superior Court in which the substantial involvement of the experts in the facts at issue justified the dismissal of their reports on grounds of bias7. The question of the admissibility of expert reports must be reviewed on a case by case basis. Our team can advise you on this issue and assist you in choosing an appropriate expert.   2019 QCCS 3269. Id., para. 23. Id., para. 25. Id., para. 28. Id., para. 29. Id., para. 30. Procureure générale du Québec c. L’Unique Assurances générales, 2018 QCCS 2511; Roy v. Québec (Procureure générale), 2016 QCCS 1829.

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  • Are you protected against phishing email?
    What the Court of Appeal said in insurance matters

    Phishing fraud is a rampant problem that causes major losses throughout the world. It consists in bad actors sending emails in which they falsely claim to be a trusted third party or legitimate company in order to obtain confidential information from the recipient for the purpose of committing fraud1. In Co-operators c. Coop fédérée2, the Court confirmed the insurer's obligation to indemnify its insured for losses resulting from such fraud, thereby confirming that the insurer was precluded from raising a new defence at trial. The Court of Appeal also addressed the notion of specific insurance provided for in article 2496 of the Civil Code of Québec (hereinafter "C.C.Q.") in the presence of a plurality of insurance. Facts In August 2014, La Coop fédérée (the "Coop") was the victim of phishing fraud. Due to false pretenses, its comptroller sent a payment order to the Coop's bank (the "Bank"), which complied with the order and transferred the sum of $4,946,355.26 in U.S. dollars to a foreign company. On August 23, 2014, the Coop became aware of the fraud, but the Bank was unable to stop the transaction or recover the funds. At that time, the Coop's account was overdrawn by $3,386,361.80, to which was added the amount of the transfer. The Coop contested the validity of the fraudulent transfer and the resulting additional overdraft with the Bank. It also informed its insurers of the losses incurred. However, The Co-operators General Insurance Company ("The Co-operators") denied the claim on the basis that the increase in the overdraft was not a property covered by the policy, that the misappropriated money belonged to the Bank and, incidentally, that the Coop had not suffered a compensable loss. As for Liberty International Underwriters ("Liberty"), which had issued an insurance policy against fraud and embezzlement, it accepted the claim subject to the rules of contribution between multiple insurers. The Coop therefore went to the Superior Court to force The Co-operators to indemnify it for the loss suffered. At the same time, Liberty claimed from The Co-operators the reimbursement of part of the indemnity that it had paid to the Coop. Superior Court As for liability for the loss, the trial judge first concluded that the Bills of Exchange Act ("BEA") does not apply to electronic funds transfers ("EFT"), that is, transfers without the exchange of paper documents. He then concluded that the overdraft on the Coop's bank account constituted a loan, that the Coop had become the owner of the misappropriated sum in accordance with article 2327 of the C.C.Q., and that it thus had to bear the loss. This conclusion led the judge to, in particular, dismiss the application filed by the Co-operators to amend its defence so that it could argue that the Coop's refusal to raise the invalidity of the payment order could not be set up against it and constituted a reason for non-coverage. Instead, the judge agreed with the Coop and Liberty, which argued that The Co-operators could not invoke new grounds for denying coverage at such a late time. According to the Court, The Co-operators had sealed its fate upon the initial denial of coverage. As for The Co-operators' insurance coverage, the judge pointed out that a contract for "property and business interruption insurance" existed, and as it was considered as a negotiated policy, the intention of the parties had precedence. However, no evidence of this intention was filed. In the absence of a specific exclusion on fraud, the judge ruled that the loss suffered by the Coop constituted a risk covered by this insurance policy. The trial judge found that the loss suffered was covered by both insurance policies, namely that of the Co-operators and that of Liberty. According to the trial judge, the Liberty insurance policy was not a specific insurance policy in that it covered all of the insured's property and all the risks that could affect it, as did the Co-operators policy. Given that both insurance policies covered the same risks, the Court concluded that there was of a plurality of insurance and apportioned the contributions of each of the insurers in proportion to their respective share of the total coverage, while taking into account the applicable deductibles. Quebec Court of Appeal The judges of the Court of Appeal dismissed the appeal except for the conclusion on the nature of the Liberty insurance policy. Like the Superior Court judge, the Court of Appeal held that the BEA does not apply to a payment order because an EFT is not a bill of exchange within the meaning of the BEA. In addition, the Court of Appeal further distinguished the two by the fact that an EFT does not include a procedure for presenting payment, is immediate and final and, unlike a bill of exchange, beneficiaries of an EFT have no title or written document that enables them to claim payment should the transaction fail. Regarding The Co-operators' application to amend its defence, the Court reiterated that the decision to grant an application for an amendment belongs to the trial judge. That judge must base this decision on three principles: An amendment is permitted if it does not delay the proceedings or is not contrary to the interests of justice; If it does not constitute an entirely new application; The lateness of the application cannot be the only justification for dismissing the application. The Court of Appeal also found that The Co-operators had sealed its fate by failing to mention these grounds upon the initial denial of coverage. In addition, the Court of Appeal confirmed that the misappropriated sum was indeed the Coop’s property. As a result, the trial judge did not err in determining that the policy covered all property of any kind and all risks, including a loss resulting from computer fraud. The policy was not ambiguous and no exclusions applied. The Court ruled that there was indeed of a plurality of insurance within the meaning of article 2496 C.C.Q. Also, the Co-operators policy and the Liberty policy contained excess clauses, resulting in the effect of such clauses having to be cancelled in order to prevent the insured from finding itself in a no-compensation situation, in accordance with the teachings of Family Insurance Corp3. In this case, the Court of Appeal determined that the Liberty policy was in fact specific insurance, as it covered a particular category of risks, namely fraud and embezzlement. As a result, this insurance became the primary insurance. On the basis of the foregoing, the Court of Appeal did not rule on the calculation method the Superior Court applied to apportion the insurers' contributions when insurance penalties of the same rank exist. Conclusion This judgment contains many noteworthy points. Among other things, it is important for insurers to make sure, when denying coverage, that all the reasons for refusing to pay benefits are fully stated. Also, with regard to a plurality of insurance, we note that even if an insurance policy includes an excess clause, it may not apply if the insured has another insurance policy with the same type of clause. Ultimately, the Court of Appeal confirmed that qualifying an insurance policy as specific should not be unduly limited to only cases where certain and determinate property is covered, and that the insurance granted for a particular category of risk may, depending on the context, constitute such specific insurance.   Canadian Anti-Fraud Centre, Phishing. Compagnie d’assurances générales Co-operators c. Coop fédérée, 2019 QCCA 1678. Family Insurance Corp v. Lombard Canada Ltd., [2002] 2 SCR 695.

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  • What lessons can we take from the fatal accident in Arizona in 2018 involving an autonomous vehicle?

    On March 18, 2018, in Tempe, Arizona, a vehicle being operated by self-driving software which was under development, collided with a pedestrian, causing her death. Following this accident, the U.S. National Transportation Safety Board ("NTSB") conducted an investigation and, on November 19, 2019, issued its preliminary results and recommendations.1 The circumstances of the accident involving an autonomous car from Uber The autonomous vehicle ("AV"), a 2017 Volvo XC90, was equipped with an automated driving system being developed by Uber Technologies Inc. ("Uber"). At the time of the collision, the vehicle was travelling at a speed of approximately 72 km/h, and was completing the second portion of a predetermined route as part of a driving test. The pedestrian was struck while crossing the street outside the crosswalk. The NTSB's investigation found that the vehicle's automated driving system had detected the pedestrian, but was unable to qualify her as a pedestrian and predict her path. Further, the automated driving system prevented the activation of the vehicle's emergency braking system, relying instead on the intervention of the human driver on board to regain control of the vehicle in this critical situation. However, videos from inside the vehicle showed that the driver was not paying attention to the road, but was rather looking at her cell phone lying on the vehicle console. Since the collision between the pedestrian and the vehicle was imminent, the inattentive driver was unable to take control of the vehicle in time to prevent the accident and mitigate the damages. What are the causes of the accident? The NTSB issued several findings, including the following: Neither the driver's experience nor knowledge, her fatigue or mental faculties, or even the mechanical condition of the vehicle, were factors in the accident; An examination of the pedestrian showed the presence of drugs in her body which may have impaired her perception and judgment; Uber's automated driving system did not adequately anticipate its safety limitations, including its inability to identify the pedestrian and predict her path; The driver of the vehicle was distracted in the moments preceding the accident. Had she been attentive, she would have had enough time to see the pedestrian and take control of the vehicle to avoid the accident or mitigate its impact; Uber did not adequately recognize the risks of distraction of the drivers of its vehicles; Uber had removed the second driver from the vehicle during the tests, which had the effect of giving the sole remaining driver full responsibility for intervening in a critical situation, thereby reducing vehicle safety. The probable cause of the accident was found to be the driver's distraction and failure to take control of the AV in a critical situation. Additional factors were identified, including insufficient vehicle safety measures and driver monitoring, associated with deficiencies in the safety culture at Uber. The NTSB issued recommendations, including the following: Arizona should implement obligations for AV project developers regarding the risks associated with the inattentiveness of vehicle drivers which are aimed at preventing accidents and mitigating risks; The NTSB should require entities conducting projects involving AVs to submit a self-assessment report on the safety measures for their vehicles. Additionnaly, the NTSBshould set up a process for the assessment of these safely measures; Uber should implement a policy on the safety of its automated driving software. Can an identical tragedy related to autonomous vehicles occur in Quebec and Canada? Following the update to the Highway Safety Code in April 2018, level 3 AVs are now permitted to be driven in the province of Quebec when their sale is allowed in Canada. Driving of level 4 and 5 automated vehicles is permitted where it is expressly regulated in the context of a pilot project.2 According to SAE International Standard J3016, level 3 AVs are vehicles with so-called conditional automation, where active driving is automated, but require the human driver to remain attentive so that they can take control of the vehicle in a critical situation. Thus, the vehicle involved in the Arizona accident, although still in the development phase, corresponded to a level 3 AV. Level 3 AVs are now circulating fully legally on Quebec roads. In Canada, the Motor Vehicle Safety Act3 and the relevant regulations thereof govern “the manufacture and importation of motor vehicles and motor vehicle equipment to reduce the risk of death, injury and damage to property and the environment”. However, there is currently no provision specifically for the regulation of automated driving software or the risks associated with the inattention of Level 3 AV drivers. With the arrival of AVs in Canada, taking in consideration the recommendations of the NTSB and to ensure the safety of all, we believe the current framework would need to be improved to specifically address VA security measures.   National Transportation Safety Board, Public Meeting of November 19, 2019, “Collision Between Vehicle Controlled by Developmental Automated Driving System and Pedestrian”, Tempe, Arizona, March 18, 2019, HWY18MH010. Highway Safety Code, CQLR c. C-24.2, s. 492.8 and 633.1; the driving of autonomous vehicules in Ontario is regulated by Pilot Project - Automated Vehicles, O Reg 306/15. Motor Vehicle Safety Act, S.C. 1993, c. 16; see, in particular, the Motor Vehicle Safety Regulations, C.R.C., c. 1038.

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  • Amendments to the Labour Standards Act: What is the rule for paid leave?

    The latest amendments to the Labour Standards Act (“LSA”) provide that, in certain specific circumstances, the employers must pay the first two days of absence of their employees instead of granting them a leave without pay. In some instances, employees claimed two additional days of paid leave from their employers even if they were already offering such leave before the amendments came into force. Two recent decisions confirmed that the government’s intention was to grant two days of paid leave to employees who did not benefit from a paid leave and not to give two additional days to employees who already had such benefits1. Amendments to the Labour Standards Act Since January 1, 2019, employees may take leave without pay for the following reasons: Family reasons: absences related to the care, health or education of their child or their spouse’s child, the state of health of their spouse or a close relative; Health reasons: absence owing to sickness, an organ or tissue donation, an accident, domestic violence, sexual violence or a crime. The duration of such authorized absence without pay depends on the reason for the absence. However, according to the latest amendments to the LSA, the first two days of absence per year taken for such reasons are now paid to employees who have three months of continuous service. The LSA stipulates that employees must notify their employer of their absence and the reason for it as soon as possible and, at the employer’s request, provide documentation attesting to this reason. You can refer to the 6 main amendments to the Act respecting labour standards in our guide for employers. Extra paid leave? Many employers, with or without unionized employees, already offer their employees various types of leave in addition to annual vacations: personal leave, flexible leave, sick leave, family leave, special leave, etc. The working conditions of employees were analyzed in two recent arbitration awards and additional paid leave on the basis of the new provisions of the LSA was denied to them. In these cases, the employers involved already offered flexible leave to their employees, which could be used at the employees’ discretion, and in particular for absences authorized by the Labour Standards Act (“LSA”) for the aforementioned family and health reasons. The arbitrators thus refused to grant these employees two additional paid days of leave for family or health reasons, given that the flexible leave days they already benefited from were equivalent to those the LSA provides for. The fact is that these employers already paid for the first two days of absence as soon as employees had three months of continuous service, even though the requirements set out in their collective agreements were stricter in this regard. It was also demonstrated that these employers were not strictly applying the provisions set out in their collective agreements in respect of required absence notices and were thus complying with the Labour Standards Act (“LSA”), which only requires that employees indicate that they will be absent as soon as possible. As long as the working conditions applied comply with the minimum provided for in the LSA, employers are not required to add to them. In conclusion: Before granting additional paid leave to comply with the latest amendments to the Labour Standards Act (“LSA”), managers should check whether, in practice, the paid leave they already offer to employees meets the LSA’s requirements. Our Labour and Employment Law team is available to provide you with advices and solutions related to the new labour standards.   Syndicat des travailleurs spécialisés de Sintra (CSD) et Sintra inc. (Région Estrie), 2019 QCTA 502 and Union des employés et employées de services, section locale 800 et CANMEC Industriel inc., 2019 QCTA 411

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  • Labour shortage: answers to your questions about hiring a foreign worker

    The labour shortage that affects Quebec as a whole as well as many other provinces has been a well-known issue for several years. Almost every week, we hear about companies that are forced to close their doors or limit their activities due to a lack of staff in positions of all nature. In order to work in Canada, foreign employees must first obtain the necessary authorizations. Employers planning to hire a foreign worker must ensure that an assessment of the candidate's profile is conducted to determine if the candidate is eligible for an immigration program. If so, it will be important to determine which program is most effective and appropriate. To guide you through this process, here are the answers to certain frequently asked questions. True or False: An employer must obtain a Labour Market Impact Assessment (LMIA) before a foreign worker can apply for a Canadian work permit False. Although a Labour Market Impact Assessment (LMIA) is normally required to obtain a work permit, an LMIA exemption may apply in some cases. Remember: a positive Labour Market Impact Assessment (LMIA) confirms the need to hire a foreign worker to perform a particular job and that no Canadian worker is available to fill this position. If the LMIA application is approved, the foreign applicant may subsequently apply for a work permit. There are however Labour Market Impact Assessment (LMIA) exemptions, of which the following are frequently used: Work permits issued under an international agreement, such as North American Free Trade Agreement (NAFTA) or Comprehensive Economic and Trade Agreement (CETA); Intra-company transferees; Youth exchange programs; Spouses or common-law partners of skilled workers or students; Work permits issued to certain holders of a Quebec Selection Certificate (“Certificat de selection du Québec – CSQ”) who reside in Québec. For a complete list of exemptions, click here. Before starting the complex process of obtaining an LMIA, we strongly suggest that you confirm that no exemption applies in that foreign worker’s case. True or false: Filing an application for permanent residence grants temporary Canadian residence status to the applicant False. Once a temporary resident has obtained a permit to remain in Canada, whether to visit, study or work, they must ensure that they maintain valid temporary resident status. To do so, the applicant must submit an application for extension or modification of their status before the expiry of their immigration documents. Applying for permanent residence does not have the direct effect of extending temporary residence status in Canada. In Quebec, temporary residents wishing to apply for permanent resident status must first obtain a CSQ, issued by the Ministère de l'Immigration, de la Francisation et de l'Intégration (MIFI). Once they obtain a CSQ, temporary residents can apply for permanent residence. Note: Holding a CSQ has no direct impact on the applicant's temporary resident status. They may be required to extend their temporary status in Canada if their permanent residence is not finalized before the expiry of their temporary status. In all cases, temporary residents are therefore required to extend their temporary status in Canada until they become permanent residents, if that is their objective. Your strategies for future recruitment Whether or not the staffing process for a vacant position has proven difficult, HR managers may find it beneficial to consider recruiting foreign candidates. A key factor not to be overlooked: verify whether an LMIA exemption applies. Foreign candidates may be responsible for obtaining their work permit and maintaining valid status in Canada, but HR managers can maximize candidates’ efforts if they are familiar with existing immigration programs. The professionals of our Business Immigration team are available to provide you with all necessary information and assist you in obtaining the necessary documents and permits.-->

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  • Intellectual property in open innovation and co-innovation in the field of artificial intelligence

    Moving far beyond the traditional models of closed innovation, artificial intelligence is progressing by means of collaborations and exchanges, both with the academic world and between companies. In Canada, the United States and Europe, innovation has evolved in ways that have changed the very design of research and development projects. In the world of information technology, closed innovation within one company is generally not sufficient, particularly for technologies using artificial intelligence. Distinguishing between collaborative innovation, open innovation and co-innovation In the field of information technology, collaborative innovation was the first model to replace closed innovation. In this type of innovation, an organization collaborates with various partners to build a value chain that it tries to organize and control. Apple is often cited as an example: it has some control over both the hardware (usually sold under its brand) and the software (third party software is made available through a virtual store that it controls). The most significant change in recent years has been the arrival of open innovation, in which several companies foster innovation both internally and externally1. Exchanges between companies are generally targeted to meet the needs of each company. Large companies, such as Samsung, enter into partnerships with start-up companies and assist them in their development. Collaborative innovation was therefore a precursor to open innovation. Indeed, the focus in collaborative innovation is on the company creating a new product or developing a new technology by means of the offerings of external parties. Open innovation, on the other hand, has a broader purpose and refers to all the means that can be used by a company to access new technology.2 Co-innovation3, or collective innovation, is the emerging model within the artificial intelligence community. It aims to promote an ecosystem that fosters innovation across several entities. Co-innovation can go hand in hand with respect for intellectual property. It is likely to4: Generate a continuous flow of ideas; Build a broad pool of knowledge, in particular through sharing data and analysis; Foster a culture of innovation through a shared vision and common objectives among partners; andCreate tacit convergence strategies between partners that are unique to them and difficult to replicate. This last point is particularly important for those who fear losing the benefits of their efforts. In this context of co-innovation, stakeholders create complex relationships between themselves, and each becomes difficult to replace. This is currently the case in artificial intelligence for some stakeholders who have developed specialized platforms that integrate into other companies' software. For example, as part of the integration of chatbots, the roles of the developers of these platforms, the companies offering conversation analysis tools, marketing firms and user companies all intersect. The implementation of APIs (application programming interface) between these players makes it possible to exchange information between them in a fairly fluid way, with each stakeholder playing a more important role in its own field of expertise. Protecting intellectual property in this context Open innovation and co-innovation are not incompatible with the notion of intellectual property. Strong intellectual property rights promote open innovation, according to the most recent studies5, as they protect members of the innovation community. Moreover, intellectual property can provide a way for stakeholders to coordinate6 and can even be a reason for a company to innovate in an open way. For example, where patents are possible7, they promote interaction between stakeholders during innovation because they ensure the innovation is protected and also disclosed. When the patent application is published, the other stakeholders obtain a fairly complete description of the technology, while at the same time becoming able to establish the identity of the party that holds the rights to it. The publication of the patent is therefore a form of knowledge exchange that also promotes alliances between stakeholders. Moreover, a potential licence would allow the company to earn revenue from a technology it has developed if it chooses not to exploit it itself. An example of this development in innovation comes from the academic world. Rather than simply licensing their technologies, universities now frequently offer technology transfer services and research partnerships.8 Some measures can be implemented to accelerate the development of artificial intelligence solutions: Adopt a design thinking approach, taking into consideration the fluid nature of innovation. Identify an ecosystem of partners, particularly keeping an eye on patents and published patent applications. Establish a flexible contractual framework for sharing data and allowing its use by partners. File patent applications, where possible. Facilitate the licensing of your technology to your partners. Implementing these measures requires agreements with various partners. It is important for your lawyers and patent agents to be involved in your company’s innovation process. In particular, they must ensure that the contracts to be entered into and the measures to protect intellectual property are in line with the desired approach to innovation.   Chesbrough, Henry William. Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press, 2003. Gallaud D. (2013) "Collaborative Innovation and Open Innovation. " In: Carayannis E.G. (eds) Encyclopedia of Creativity, Invention, Innovation and Entrepreneurship. Springer, New York, NY Lee, Sang M. and Silvana Trimi. "Innovation for creating a smart future" Journal of Innovation & Knowledge 3.1 (2018): 1-8 Ibid. Da Silva, Mário APM. "Open innovation and IPRs: Mutually incompatible or complementary institutions?" Journal of Innovation & Knowledge 4.4 (2019): 248-252 Bortolami, Giovanni. "Risolvendo il paradosso dell'innovazione: come la protezione della proprietà intellettuale promuove l'innovazione aperta." (2018). Algorithms alone are usually not patentable, but several applications of artificial intelligence can be. See: https://www.lavery.ca/en/publications/our-publications/3167-artificial-intelligence-intellectual-property-cross-border-challenges-to-protect-personal-information-and-privacy.html. Nambisan, Satish, Donald Siegel and Martin Kenney. "On open innovation, platforms, and entrepreneurship." Strategic Entrepreneurship Journal 12.3 (2018): 354-368.

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  • 5 keys to successfully sell your franchise system

    Though it doesn’t happen often, some franchisors start a franchise system with the goal of selling it in the short or medium term. However, the quality of the infrastructure required to build a viable franchise system and the amount of resources (financial or other) that need to be invested over time is likely to lead such franchisors to reconsider their initial goal and either develop a strategic partnership or simply cave in and sell their franchise system to a competitor. Given that a potential partner or buyer will likely carry out due diligence to substantiate the business opportunity, it is preferable to determine what issues may compromise or interrupt negotiations and try to resolve them in advance. Identifying issues in the relationship with franchisees and making the necessary adjustments Before thinking of selling all or part of your franchise system, you should assess the quality of your franchisees and your relationship with them. If you have conflicts with some of them, it is high time to resolve them. Unless faced with an isolated case that you have already taken steps to resolve, your potential partner or buyer may react negatively upon learning that some franchisees in your system are critical of the franchisor and may fear the impact that claims could have on the franchisor’s image, concept and brand. The most frequent criticisms against franchisors are related to a lack of support and collaboration, a lack of transparency in the use of national advertising funds, a concept and/or operations that aren’t viable, and the belief that the franchisor does too little for its franchisees. To learn if your system harbours any such criticisms, you should not visit your franchisees only to assess the quality of their operations. You should give them the opportunity to openly discuss the challenges and situations they face with your management team. It is always better to get franchisees to confide directly in their franchisor rather than letting dissatisfied franchisees discuss their points of contention between themselves. A better understanding of the state of your franchise system will make it possible for you to be more transparent in disclosing the issues underlying a potential transaction to your prospective buyer. Even if such transparency may lead to a lower sale price, it avoids the financial consequences of incomplete or inaccurate representations that you may make to the future buyer and helps to maintain trust. Reviewing and structuring documentation As part of its due diligence, the buyer and its lawyers and financial advisors will review all key aspects of the franchisor’s system, including contracts (franchises, leases, suppliers, etc.), intellectual property and accounting. Missing or incomplete documentation will likely discourage the buyer and justify a reduction in the sale price, or, even worse, withdrawal from the proposed transaction. It is therefore essential, before the buyer’s due diligence begins, that you instruct your resources to verify that your documentation is compliant and reliable, correct any deficiencies and obtain missing information, if any, even if it means hiring external consultants. Compiling your system’s financial information A potential buyer will undoubtedly want to analyze your financial statements and tax returns. It is also very likely that it will want to consult accounting records and verify some key performance indicators. Thus, your system’s monthly sales (compared to those of previous years), geographic trends, how profitable franchisees’ operations are and how frequently they pay their royalties will certainly be of interest to a buyer. In addition, a diligent buyer will pay close attention to a franchisor’s contractual obligations towards third parties, such as lessors and suppliers, and any warranties that it may have made to third parties. In short, full and structured disclosure of the financial information underlying your system will make it easy to demonstrate future profitability. Negotiating an advantageous Earn-out clause Negotiating the sale price of a franchise system can be done in different ways. In addition to the traditional EBITDA valuation of the business, it is not unusual for a franchisor (whose management will ensure an operational transition after the sale) to negotiate an upward adjustment to the sale price should the franchisor achieve, after a determined post-transaction period, better financial results than those on which the buyer based its valuation of the sale price (the “Earn-out”). For example, the sales agreement could provide that a sum equal to the increase in EBITDA that the franchisor achieves during the Earn-out period, multiplied by the EBITDA multiple applied to the transaction, be paid in addition to the sale price. Limiting the chances of your transaction failing by choosing a suitable buyer Make no mistake: a transaction isn’t concluded upon signing a letter of intent. There’s still a long way to go. A multitude of conditions in favour of the buyer generally need to be fulfilled in order for the transaction to proceed. Stipulated time limits often need to be extended by mutual agreement for the parties involved to cover all bases and close the sale. This doesn’t mean that you must consent to all the buyer’s requests to extend time limits. While delays in a transaction are usually well-founded, sometimes a buyer tries to buy time in order to exert pressure on the seller, or it will do so to finish due diligence that it deliberately made more complicated in order to find arguments justifying a decrease in the sale price./p> To avoid such an unfortunate situation, it is in your interest to be well informed about your potential buyer and how it handled past transactions. To assist you and make the best of your business model, feel free to contact a professional of our team!

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  • What can be done to discipline a manager? Potential solutions to keep in mind

    Except in cases of “serious misconduct,” managing a manager whose performance is unsatisfactory or whose conduct is inappropriate can be delicate. Because of workplace usage and practices in Quebec, disciplinary management of managers differs from that applied to other employees of the company. Progressive disciplinary measures do not apply to managers, who are rarely, if ever, suspended. HR Manager : Guidelines In a situation involving an executive, an HR manager will have to assess whether or not there is a “serious reason” for dismissal in light of the duties assigned to the executive and his or her responsibilities with respect to alleged actions or situation. For example, an executive who does not take into account the requests of the Board of Directors or his or her supervisor would be guilty of insubordination, which is a serious reason for dismissal, as is the inability to put into place an effective team. Given that executives have a high degree of discretion in how they carry out their duties and responsibilities, it is up to them to find ways to meet the company’s expectations and objectives, unless these are unrealistic or unreasonable in the circumstances. Nevertheless, executives must be notified of any dissatisfaction on the part of their employer when their conduct is inappropriate or does not meet stated expectations and objectives. It will then be up to them to make the necessary adjustments. The courts recognize these special rules for executives. The employer’s power to sanction Section 2094 of the Civil Code of Québec (C.C.Q.) provides that an employer may unilaterally resiliate an employee’s employment contract without notice for a “serious reason.” The courts consider that a serious reason is synonymous with dismissal for “good and sufficient cause,” as defined in jurisprudence or in section 124 of the Act respecting labour standards. Taking into account the specific context of executives is necessary. They have considerable latitude in the performance of their duties, they exercise control over many company employees, their responsibilities may influence the future of the company, and they generally have better working conditions. As a result, employers may be more demanding of executives, who [translation] “should not be treated as subordinate employees in disciplinary matters1.” Thus, the courts have recognized the following principles: Executives cannot “benefit” from so-called progressive discipline like other company employees, as a suspension would be illogical given the nature of their position. Disciplinary measures are intended to help employees understand the seriousness of a situation in order to be able to remedy it. This cannot reasonably be achieved because a suspended manager would suffer a loss of credibility with the teams that he or she supervises2. An employer must inform an executive of any dissatisfaction in terms of conduct or performance. “When the executive in question knows the reasons for the dissatisfaction, it is up to him or her to review his or her ways of doing things and meet senior management’s expectations. Senior management is not required to explain what needs to be changed, even more so when the executive has many years of experience.”3 A “serious reason” refers to an employee’s violation of one or more essential conditions of his or her employment contract, or improper conduct on his or her part. In Sirois c. O'Neil, the Court of Appeal considered that the dismissal of Microcell’s President and Chief Executive Officer was justified because, by his conduct, he had alienated the majority of the senior managers that he was responsible for. The Court considered that he had failed to fulfil the obligations inherent to the task entrusted to him, which involved direction, management and organization: [Translation] “He had been given a command position. It was his obligation to form a united, motivated and efficient team.  That was his main role.  He failed in his task. To illustrate the situation, the locomotive was unable to pull the cars4.” In order to determine whether the employer’s reasons for dismissal are “serious,” the various factors are assessed according to the circumstances, including the importance of the executive’s position, the nature of his or her employment and the seriousness of the complaints.  In Marc Van Den Bulcke c. Far-WicSystèmesLtée et GroupeSécuritéC.M. inc. the Superior Court held that: [Translation] [61] “Depending on the circumstances, negligence in the performance of duties, lack of self-discipline and performance below that agreed upon with the employer constitute serious reasons for dismissal without notice or compensation in lieu of notice5.” The Tribunal administratif du travail essentially applies the same principles as the courts. As an illustration, the Commission des relations du travail pointed out that it is up to an executive to know what conduct is incompatible with his or her obligations under the employment contract in Mommaerts c. Élopak Canada Inc.6: [Translation] [122] “(...) Moreover, when the latter is given considerable responsibilities, it becomes clear that he or she cannot be treated in the same way as an employee.  Indeed, the greater a person’s responsibilities in a company, the less need there is to warn them of the consequences of the actions that they take or fail to take. This is implicit to the function. [Translation] [123] “How can we believe that a suspended executive would have the same credibility with employees, fellow executives, suppliers and customers? The answer is obvious and favours a different application of the principle of gradation of sanctions.” Conclusion Although executives have privileges over other employees in an organization due to their status, this status can quickly render them vulnerable if they fail to live up to their responsibilities.   Valcourt c. Maison l'Intervalle, D.T.E. 95T-322 (S.C.), page 12 Yersh c. CRT et FCA Canada inc. (Chrysler), 2019 QCSC 740, para. 111-113 Bélanger c. Opéra de Québec, D.T.E. 98T-197 (S.C.), page 23. See also Laramée c. Poly-Actions Inc., D.T.E. 90T-923 (S.C.) and Houle et Fédération de l’U.P.A. de Sherbrooke, D.T.E. 84T-303 (A.T.) J.E.99-1343 (C.A.), page 29 2010 QCSC 6654, para. 61 2011 QCCRT 0375, para.122 and 123

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  • Estoppel based on patent prosecution history in Canada: The Pandora’s box is opened

    Nearly twenty years ago, the Supreme Court of Canada1 rejected the theory of estoppel based on a patent’s prosecution history, more commonly known as "file wrapper estoppel"2). At the time, Justice Binnie wrote, “[…]purposive construction, which keeps the focus on the language of the claims, seems also to be inconsistent with opening the pandora's box of file wrapper estoppel”. However, in December 2018, section 53.1 was added to the Patent Act (the "Act"), which allows for references to communications with the Canadian Intellectual Property Office ("CIPO") "to rebut any representation made by the patentee in the action or proceeding as to the construction of a claim". In Canmar Foods Ltd v. TA Foods Ltd 2019 FC 1233, Justice Manson of the Federal Court rendered the first decision on file wrapper estoppel in Canada since this new provision came into force. The decision was handed down in the context of a motion for summary judgment. Salient points When a patentee amends the claims to limit their scope, the elements thus introduced are essential elements of the claims. Section 53.1 of the Act can apply even if the patentee has not adopted a construction that contradicts a previous statement. Where the patentee refers to the "file wrapper" of another jurisdiction (in this case, the US) during prosecution of the patent application in Canada, they make that file wrapper relevant for the purposes of applying section 53.1 of the Act. The Federal Court appears to be loosening the jurisprudence applicable to motions for summary judgment. The party challenging a motion for summary judgment must submit the best evidence available. The construction of certain terms of the claims may be made by a judge even in the absence of expert evidence. Background Canmar Foods Ltd. ("Canmar") holds a patent on a method for roasting oil seeds as well as products derived therefrom (the "Patent"). The method claimed in the Patent consists of foursteps, including heating the seeds to a certain temperature in a "stream of air" and transferring the heated seeds "into an insulated or partially insulated roasting chamber or tower." During prosecution of the Patent, the aforementioned steps of heating the seeds in a "stream of air" and transferring the heated seeds had been added to the claims; this amendment to the claims was made to reduce the scope thereof. While making this amendment, Canmar mentioned that the claims “correspond substantially” to those submitted during prosecution of a related US patent application. Canmar sued TA Foods Ltd. ("TA") for patent infringement. TA made a motion for summary judgment on the grounds that the method employed by TA does not include heating the seeds in a "stream of air," nor does it include transferring the heated seeds "into an insulated or partially insulated roasting chamber or tower." In support of the motion for summary judgment, the parties both produced affidavits. However, no expert evidence as to the construction of the terms of the Patent by a person of ordinary skill in the art ("POSITA") was presented. Issues before the Federal Court Should the Court grant the motion for summary judgment or leave these questions to the trial judge? Can the Court use the file wrapper of the corresponding US patent application to construe claims under section 53.1 of the Act? Can the Court conclude on the basis of the file wrapper that the elements "stream of air" and "into an insulated or partially insulated roasting chamber or tower" are essential elements of the patent claims? Is the evidence presented sufficient to construe the terms in question and to conclude that they are absent from the defendant's method? The judgment In his judgment, Justice Manson first considers the criteria applicable to a motion for summary judgment. The case law indicates that when certain issues require assessing the credibility of witnesses, these issues should be left to the trial judge. Justice Manson refuses to apply these principles, which had been elaborated by the Federal Court of Appeal in MacNeil Estatec v. Canada (Department of Indian and Northern Affairs), 2004 FCA 50. Justice Manson further writes: The Supreme Court held that “summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims” (Hryniak, above at para 5) […]There is no determinative test for summary judgment. One articulation is that the test is not whether the Plaintiff cannot possibly succeed at trial, but whether the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial […]3. He adds that the party defending an application for summary judgment cannot simply claim that the applicant has not met its burden and speculate as to grounds that could possibly be raised on the merits: Parties are required to put their best foot forward. The responding party cannot rely on what might be adduced as evidence at a later stage, but must set out specific facts and adduce evidence showing that there is a genuine issue for trial (Federal Courts Rules, r 213; Sterling Lumber Co v Harrison, 2010 FCA 21 at para 8)4. Justice Manson refers to the principles of claim construction developed by the Supreme Court in Free world trust and to the fact that Justice Binnie refused to apply the doctrine of file wrapper estoppel; however, Justice Manson then refers to the newly added section 53.1 of the Act, and adds: This new provision is specific to using Canadian prosecution file histories to rebut any position taken on claim construction.5 “However, in this case, I find that the patentee specifically referred to the corresponding US Application prosecution history and acknowledged that the amendments to the claims in the ‘376 file history were made to overcome novelty and obviousness concerns as raised in the US Application prosecution history. Accordingly, the Court may look at the US Application prosecution history as part of a purposive construction of the claims of the ‘376 Patent.”6 The Court in part imports the principles of US law to determine the scope of section 53.1 of the Act. Quoting the United States Supreme Court, Justice Manson adds: "By amending the application, the inventor is deemed to concede that the patent does not extend as far as the original claim” (Festo at 737-738)7. Consequently, Justice Manson concludes that the elements of heating the seeds in a "stream of air" and transferring them "into an insulated or partially insulated roasting chamber or tower" are essential elements of the claim. The plaintiff argued that the Court cannot construe the terms of the Patent in the absence of expert evidence demonstrating how said terms would beconstrued by the POSITA. The Court rejected this argument: Based on the claim, the disclosure, and the prosecution history of the ‘376 Patent, I find that expert evidence is not required for me to be able to purposively construe the two elements of Claim 1 that are at issue.8 Although not explicitly stated in the judgment, it can be reasonably assumed that, had the plaintiff submitted expert evidence regarding claim construction by the POSITA which supported a finding of infringement, the Court would have possibly dismissed the motion for summary judgment. In the absence of such evidence, the Court seems to take for granted that it does not exist (since the plaintiff had to "put their best foot forward"). Therefore, patent agents in Canada must be cautious in their representations to CIPO and especially when referring to the prosecution of corresponding applications and patents in other jurisdictions. An admission that an amendment was made to limit the scope of a claim in response to prior art will likely result in the application of section 53.1 of the Act. Unsurprisingly, the Federal Court interprets section 53.1 of the Act as a desire on the part of the legislature to introduce the doctrine of file wrapper estoppel into Canadian law. It will, however, be interesting to see whether its application will be limited to merely rebutting "any representation made by the patentee in the action or proceeding as to the construction of a claim in the patent," or if, as Justice Manson appears to have done, it will be used to support the notion that the "prosecution history aids in the purposive construction of the disputed elements"10 of the claims11.   Free World Trust v. Électro Santé Inc., 2000 SCC 66, para 66. Despite this clear decision, the Federal Court has accepted / refused variations of this doctrine in the past: see interalia Distrimedic Inc. v. Dispill Inc., 2013 FC 1043, para 210; Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC, 2015 FC 125, para 154; and Pollard Banknote Limited v. BABN Technologies Corp. 2016 FC 883 paras 238 and 239. Paras 46 and 48 Para 50 Para 62 Para 70 Para 67 Para 81 See para 79 “Regardless of the US Application prosecution history, I do not see how the process described in the Popowich Affidavit could possibly constitute heating the oil seed “in a stream of air” as that term is used in Claim 1 of the ‘376 Patent.” Para 85 On the other hand, Justice Mansonwrites the following at paragraph 84: The Plaintiff argued that section 53.1 is not engaged, as the Plaintiff did not make any representation as to the construction of Claim 1.Further, the Plaintiff argued that the Court is not in a position to determine whether the disputed claim elements are essential or not. However, as submitted by the Defendant, the Plaintiff made multiple representations in its written submissions to the effect that the language of Claim 1 is not limited to a particular type or source of heating. Note, however, that these representations would have only been submitted in response to the motion for summary judgment, which would certainly have referenced the file wrapper before any representations had been made by the plaintiff.

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  • Bill 37: What changes can be expected for Public Contracts?

    On September 18, 2019, the Minister Responsible for Government Administration and Chair of the Conseil du trésor introduced Bill 37, An Act mainly to establish the Centre d’acquisitions gouvernementales et Infrastructures technologiques Québec1 As its name suggests, this bill is intended to implement the restructuring of government procurement announced in the 2019–2020 budget2. If the bill is passed, the Centre de services partagés du Québec (CSPQ), as well as some other procurement organizations, will be replaced by two bodies: the Centre d’acquisitions gouvernementales will be the organization responsible for meeting the government’s general procurement needs, and Infrastructures technologiques Québec will handle its digital procurement. In 2017–2018, information technology contracts accounted for 17% of public body contracts3. Some administrative functions of the CSPQ would also be transferred to the Agence du revenu du Québec and the Conseil du trésor. Bill 37 also makes a number of amendments to the Act respecting contracting by public bodies, CQLR c. C-65.1, and its regulations, two of which are noteworthy. It is planned that, as of April 1, 2020, information relating to contracts involving an expenditure of more than $10,000, whether reached by mutual agreement or following a call for tenders, will have to be published in the electronic tendering system. The current limit is $25,0004. The bill also provides that, as of the date its assent (currently scheduled for the end of 2019), the imposition of a penalty for a final reassessment under the general anti-avoidance rule regarding an abusive tax avoidance transaction5 on the part of a company or related person will be recorded in the Register of Enterprises Ineligible for Public Contracts for five years. Such penalties will also be considered by the Autorité des marchés publics in its decision to authorize a contract with a public body. A 60-day transitional period is provided for in Bill 37, during which a taxpayer may make a late preventive disclosure to the Minister of Revenue6 by filing the form Mandatory or preventive disclosure of tax planning (TP-1079.DI-V). However, this type of disclosure will not be accepted if an audit by the Agence du revenu du Québec or the Canada Revenue Agency is already ongoing with respect to such a transaction. This measure is part of the current fight against aggressive tax planning7.   Quebec (National Assembly), Bill 37, An Act mainly to establish the Centre d’acquisitionsgouvernementales and Infrastructures technologiques Québec, 42nd Legislature, 1st Session. Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. H.61. Québec (Conseil du trésor), Statistiques sur les contrats des organismes publics 2017–2018 (Québec, Direction de la reddition de comptes et du soutien à l’encadrement des contrats publics, March 2019), p. 1. Sections 22 and 23 of the Act respecting contracting by public bodies, CQLR c. C-65.1; sections 39 and 39.2 of the Regulation respecting supply contracts of public bodies, CQLR c. C-65.1, r. 2; sections 52 and 52.2 of the Regulation respecting service contracts of public bodies, CQLR c. C-65.1, r. 4; sections 42 and 42.2 of the Regulation respecting construction contracts of public bodies, CQLR c. C-65.1, r. 5; sections 73 and 75 of the Regulation respecting contracting by public bodies in the field of information technologies, CQLR c. C-65.1, r. 5.1. Sections 1079.13.1 and 1079.13.2 of the Taxation Act, CQLR c. I-3. Section 1079.8.7.1 of the Taxation Act, CQLR c. I-3. See, in particular, Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. D.81.

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  • Changes to the Canadian Patent Rules came into force on October 30th 2019

    The new Patent Rules, as well as certain amendments to the Patent Act, came into force on October 30, 2019. These changes implement the Patent Law Treaty and reduce the risk to applicants of a loss of rights but also bring about practice changes worthy of mention. Canadian national phase of a PCT application For applications filed in Canada via PCT national phase entry: A little bit faster… Under the new system, the deadline to request examination will be reduced to 4 years from the PCT international filing date (currently 5 years). The shortened deadline will apply to cases having a PCT international filing date on or after October 30, 2019. Further, the deadline to respond to an Office Action will be reduced to 4 months with possible fee-based extension to 6 months (currently 6 months with no extension).That means that prosecution shall take less time overall. “Late” national phase entry It is currently possible to enter the CA national phase past the 30-month deadline and up to 42 months from the priority date, as a matter of right. Under the transitional provisions, the current system shall continue to apply to PCT applications with a PCT international filing date prior to October 30, 2019. Subsequently, for cases with a PCT international filing date on or after October 30, 2019, such “late” national phase entry will only be possible if missing the original 30-month deadline was unintentional. A statement must be submitted to that effect. The Canadian Intellectual Property Office (CIPO) will have the discretion to accept or refuse such declarations. So it will be wise to consider the 30-month deadline a hard deadline for CA national phase entry. Missing deadlines for requesting examination or paying maintenance fees Under the current system, if such a deadline is missed, a further 12 months would be available via the abandonment/reinstatement system (for applications) or the late payment system (for patents), as a matter of right. The new system will provide an additional safeguard to applicants, as missing such deadlines will trigger the issuance of a CIPO notice requesting that the required action be taken within a new deadline. However, missing the new deadline will result in a new category of abandonment requiring reinstatement under a “due care” standard. A statement must be submitted to show “due care”. Once again CIPO will have discretion to accept or refuse declarations of “due care”. This new system will apply to any deadline to request examination or pay a maintenance fee that falls on or after October 30, 2019. The prudent approach will be to avoid relying on a showing of due care by meeting all deadlines. Restoration of priority Canadian practice will come into line with the restoration of priority provisions of the PCT. This extends the usual 12-month priority period by a further 2 months if missing the original 12-month deadline was unintentional (the standard to be used in CA), and will apply to cases with a PCT international filing date on or after October 30, 2019. Therefore, applicants can rest easy that such a restoration of priority will also be available in Canada. Certified copies of priority applications Under the new system, it will become necessary to file a certified copy of any priority applications (or refer to a digital library to access the document). Note that satisfying the PCT certified copy requirements during the international phase will also satisfy the new Canadian requirements for the national phase application. “Regular” Canadian applications For Canadian applications directly filed with the CIPO (i.e., not via the PCT), equivalent changes to those noted above (with the exception of “late” national phase entry, which is not applicable) will be implemented by comparable provisions. The following additional changes are also noteworthy: Certified copies of priority applications For Canadian applications claiming priority under the Paris Convention, it will become necessary to file a certified copy of any priority applications or refer CIPO to a digital library such as WIPO-DAS to access the document. The deadline will be the later of 4 months from filing and 16 months from priority. It will of course be good practice to have such certified copies available upon filing in Canada. Easier to secure a Canadian filing date It will be easier to obtain a filing date for such direct-filed applications, as various requirements may be fulfilled shortly after filing. Notably, a translation into English or French, if applicable, may be submitted post-filing, in contrast to Canadian national phase applications filed via the PCT. It will nonetheless be good practice to have all documents and information ready at filing. We can show you the way! We can help guide applicants as we transition to this new era of Canadian patent practice. Feel free to contact a member of our team!

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