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  • SOCAN Decision: Online music distributors must only pay a single royalty fee

    In Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association1 (the “SOCAN Decision”), the Supreme Court of Canada ruled on the obligation to pay a royalty for making a work available to the public on a server, where it can later be streamed or downloaded. At the same time, it clarified the applicable standard of review for appeals where administrative bodies and courts share concurrent first instance jurisdiction and revisited the purpose of the Copyright Act2and its interpretation in light of the WIPO Copyright Treaty3. The Supreme Court also took the opportunity to reiterate the importance of the principle of technological neutrality in the application and interpretation of the Copyright Act. This reminder can also be applied to other artistic mediums and is very timely in a context where the digital visual arts market is experiencing a significant boom with the production and sale of non-fungible tokens (“NFTs”). In 2012, Canadian legislators amended the Copyright Act by adopting the Copyright Modernization Act4. These amendments incorporate Canada’s obligations under the Treaty into Canadian law by harmonizing the legal framework of Canada’s copyright laws with international rules on new and emerging technologies. The CMA introduced three sections related to “making [a work] available,” including section 2.4(1.1) of the CMA. This section applies to original works and clarifies section 3(1)(f), which gives authors the exclusive right to “communicate a work  to the public by telecommunication”: 2.4(1.1) Copyright Act. “For the purposes of this Act, communication of a work or other subject-matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public.” Before the CMA came into force, the Supreme Court also found that downloading a musical work from the Internet was not a communication by telecommunication within the meaning of section 3(1)(f) of the CMA5, while streaming was covered by this section.6 Following the coming into force of the CMA, the Copyright Board of Canada (the “Board”) received submissions regarding the application of section 2.4(1.1) of the Copyright Act. The Society of Composers, Authors and Music Publishers of Canada (“SOCAN”) argued, among other things, that section 2.42.4(1.1) of the Copyright Act required users to pay royalties when a work was published on the Internet, making no distinction between downloading, streaming and cases where works are published but never transmitted. The consequence of SOCAN’s position was that a royalty had to be paid each time a work was made available to the public, whether it was downloaded or streamed. For each download, a reproduction royalty also had to be paid, while for each stream, an additional performance royalty had to be paid. Judicial history The Board’s Decision7 The Board accepted SOCAN’s interpretation that making a work available to the public is a “communication”. According to this interpretation, two royalties are due when a work is published online. Firstly,  when the work is made available to the public online, and secondly, when it is streamed or downloaded. The Board’s Decision was largely based on its interpretation of Section 8 of the Treaty, according to which the act of making a work available requires separate protection by Member States and constitutes a separately compensable activity. Federal Court of Appeal’s Decision8 Entertainment Software Association, Apple Inc. and their Canadian subsidiaries (the “Broadcasters”) appealed the Board’s Decision before the Federal Court of Appeal (“FCA”). Relying on the reasonableness standard, the FCA overturned the Board’s Decision, affirming that a royalty is due only when the work is made available to the public on a server, not when a work is later streamed. The FCA also highlighted the uncertainty surrounding the applicable review standard in appeals following Vavilov9 in cases where administrative bodies and courts share concurrent first instance jurisdiction. SOCAN Decision The Supreme Court dismissed SOCAN’s appeal seeking the reinstatement of the Board’s Decision. Appellate standards of review The Supreme Court recognized that there are rare and exceptional circumstances that create a sixth category of issues to which the standard of correctness applies, namely concurrent first instance jurisdiction between courts and administrative bodies. Does section 2.4(1.1) of the Copyright Act entitle the holder of a copyright to the payment of a second royalty for each download or stream after the publication of a work on a server, making it publicly accessible? The copyright interests provided by section 3(1) of the Copyright Act The Supreme Court began its analysis by considering the three copyright interests protected by the Copyright Act, or in other words, namely the rights provided for in section 3(1): to produce or reproduce a work in any material form whatsoever; to perform the work in public; to publish an unpublished work. These three copyright interestsare distinct and a single activity can only engaged one of them. For example, the performance of a work is considered impermanent, allowing the author to retain greater control over their work than reproduction. Thus, “when an activity allows a user to experience a work for a limited period of time, the author’s performance right is engaged. A reproduction, by contrast, gives a user a durable copy of a work”.10 The Supreme Court also emphasized that an activity not involving one of the three copyright interests under section 3(1) of the Copyright Act or the author’s moral rights is not protected by the Copyright Act. Accordingly, no royalties should be paid in connection with such an activity. The Court reiterated its previous view that downloading a work and streaming a work are distinct protected activities, more precisely  downloading is considered reproduction, while streaming is considered performance. It also pointed out that downloading is not a communication under section 3(1)(f) of the Copyright Act, and that making a work available on a server is not a compensable activity distinct from the three copyright interests.11 Purpose of the Copyright Act and the principle of technological neutrality The Supreme Court criticized the Board’s Decision, opining that it violates the principle of technological neutrality, in particular by requiring users to pay additional fees to access online works. The purpose of the CMA was to “ensure that [the Copyright Act] remains technologically neutral”12 and thereby show, at the same time, Canada’s adherence to the principle of technological neutrality. The principle of technological neutrality is further explained by the Supreme Court: [63] The principle of technological neutrality holds that, absent parliamentary intent to the contrary, the Copyright Act should not be interpreted in a way that either favours or discriminates against any form of technology: CBC, at para. 66. Distributing functionally equivalent works through old or new technology should engage the same copyright interests: Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2012 SCC 36, [2012] 2 S.C.R. 326, at para. 43; CBC, at para. 72. For example, purchasing an album online should engage the same copyright interests, and attract the same quantum of royalties, as purchasing an album in a bricks-and-mortar store since these methods of purchasing the copyrighted works are functionally equivalent. What matters is what the user receives, not how the user receives it: ESA, at paras. 5-6 and 9; Rogers, at para. 29. In its summary to the CMA, which precedes the preamble, Parliament signalled its support for technological neutrality, by stating that the amendments were intended to “ensure that [the Copyright Act] remains technologically neutral”. According to the Supreme Court, the principle of technological neutrality must be observed in the light of the purpose of the Copyright Act, which does not exist solely for the protection of authors’ rights. Rather, the Act seeks to strike a balance between the rights of users and the rights of authors by facilitating the dissemination of artistic and intellectual works aiming to enrich society and inspire other creators. As a result, “[w]hat matters is what the user receives, not how the user receives it.”13 Thus, whether the reproduction or dissemination of the work takes place online or offline, the same copyright applies and leads to the same royalties. What is the correct interpretation of section 2.4(1.1) of the Copyright Act? Section 8 of the Treaty The Supreme Court reiterated that international treaties are relevant at the context stage of the statutory interpretation exercise and they can be considered without textual ambiguity in the statute.14 Moreover, wherethe text permits, it must be interpreted so as to comply with Canada’s treaty obligations, in accordance with the presumption of conformity, which states that a treaty cannot override clear legislative intent.15 The Court concluded that section 2.4(1.1) of the Copyright Act was intended to implement Canada’s obligations under Section 8 of the Treaty, and that the Treaty must therefore be taken into account in interpreting section 2.4(1.1) of the Act. Although Section 8 of the Treaty gives authors the right to control making works available to the public, it does not create a new and protected “making available” right that would be separately compensable. In such cases, there are no “distinct communications” or in other words, “distinct performances”.16 Section 8 of the Treaty creates only two obligations: “protect on demand transmissions; and give authors the right to control when and how their work is made available for downloading or streaming.”17 Canada has the freedom to choose how these two objectives are implemented in the Copyright Act, either through the right of distribution, the right of communication to the public, the combination of these rights, or a new right.18 The Supreme Court concluded that the Copyright Act gives effect to the obligations arising from Section 8 of the Treaty through a combination of the performance, reproduction, and authorization rights provided for in section 3(1) of the Copyright Act, and by respecting the principle of technological neutrality.19 Which interpretation of section 2.4(1.1) of the Copyright Act should be followed? The purpose of section 2.4(1.1) of the Copyright Act is to clarify the communication right in section 3(1)(f) of the Copyright Act by emphasizing its application to on-demand streaming. A single on-demand stream to a member of the public thus constitutes a “communication to the public” within the meaning of section 3(1)(f) of the Copyright Act.20 Section 2.4(1.1) of the Copyright Act states that a work is performed as soon as it is made available for on-demand streaming.21 Therefore, streaming is only a continuation of the performance of the work, which starts when the work is made available. Only one royalty should be collected in connection with this right: [100] This interpretation does not require treating the act of making the work available as a separate performance from the work’s subsequent transmission as a stream. The work is performed as soon as it is made available for on-demand streaming. At this point, a royalty is payable. If a user later experiences this performance by streaming the work, they are experiencing an already ongoing performance, not starting a new one. No separate royalty is payable at that point. The “act of ‘communication to the public’ in the form of ‘making available’ is completed by merely making a work available for on?demand transmission. If then the work is actually transmitted in that way, it does not mean that two acts are carried out: ‘making available’ and ‘communication to the public’. The entire act thus carried out will be regarded as communication to the public”: Ficsor, at p. 508. In other words, the making available of a stream and a stream by a user are both protected as a single performance — a single communication to the public. In summary, the Supreme Court stated and clarified the following in the SOCAN Decision: Section 3(1)(f) of the Copyright Act does not cover download of a work. Making a work available on a server and streaming the work both involve the same copyright interest to the performance of the work. As a result, only one royalty must be paid when a work is uploaded to a server and streamed. This interpretation of section 2.4(1.1) of the Copyright Act is consistent with Canada’s international obligations for copyright protection. In cases of concurrent first instance jurisdiction between courts and administrative bodies, the standard of correctness should be applied. As artificial intelligence works of art increase in amount and as a new market for digital visual art emerges, driven by the public’s attraction for the NFT exchanges, the principle of technological neutrality is becoming crucial for understanding the copyrights attached to these new digital objects and their related transactions. Fortunately, the issues surrounding digital music and its sharing and streaming have paved the way for rethinking copyright in a digital context. It should also be noted that in decentralized and unregulated digital NFT markets, intellectual property rights currently provide the only framework that is really respected by some market platforms and may call for some degree of intervention on the part of the market platforms’ owners. 2022 SCC 30. R.S.C. (1985), c. C-42 (hereinafter the “Copyright Act”). Can. T.S. 2014 No. 20, (hereinafter the “Treaty”). S.C. 2012, c. 20 (hereinafter the “CMA”). Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34. Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35. Copyright Board of Canada, 2017 CanLII 152886 (hereinafter the “Board’s Decision”). Federal Court of Appeal, 2020 FCA 100 (hereinafter the “FCA’s Decision”). Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65. SOCAN Decision, par. 56. Ibid, para. 59. CMA, Preamble. SOCAN Decision, para. 70, emphasis added by the SCC. Ibid, paras. 44-45. Ibid, paras. 46-48. Ibid, paras. 74-75. Ibid, para. 88. Ibid, para. 90. Ibid, paras. 101 and 108. Ibid, paras. 91-94. Ibid, paras. 95 and 99-100.

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  • Canadian Patents: Federal Court confirms that the PM(NOC) Regulations provide a patent enforcement mechanism only in relation to products that are in fact available to Canadians

    In a recent Federal Court decision, Justice Fothergill dismissed AbbVie’s applications for judicial review of the following decisions of the Minister of Health (the “Minister”): that JAMP was not a “second person” for the purposes of s 5(1) of the PM(NOC) Regulations; and to issue NOCs to JAMP for its SIMLANDI Presentations. Background AbbVie's drug HUMIRA first received approval in Canada in 2004 as a 50 mg/mL concentration of adalimumab. HUMIRA is widely used to treat numerous medical conditions including rheumatoid arthritis, adult and pediatric Crohn’s disease, and psoriasis. In 2016, high-concentration (100 mg/mL) HUMIRA was approved in Canada in a 40 mg/0.4 mL pre-filled syringe (DIN 02458349), and as a 40 mg/0.4 mL pre-filled auto-injector pen (DIN 02458357). In fact, AbbVie has marketing authorization in Canada for a variety of concentrations, but is actively selling only: the original (lower) 50 mg/mL concentration in 40 mg/0.8 mL strengths in both auto-injector pen and pre-filled syringe presentations, and the newer (higher) 100 mg/mL concentration in a 20 mg/0.2 mL pre-filled syringe. In December 2020 or January 2021, JAMP sought regulatory approval in Canada for its SIMLANDI drug, a “biosimilar” of AbbVie’s HUMIRA, in some of the strengths not actively sold by AbbVie (i.e., a 40 mg/0.4 mL pre-filled syringe, a 40 mg/0.4 mL auto-injector pen, and an 80 mg/0.8 mL pre-filled syringe). In its NDS, JAMP relied on three HUMIRA drug products having the same exact dosage forms, strengths, and routes of administration as the drugs to be marketed as SIMLANDI. None of these formulations of HUMIRA was marketed in Canada by AbbVie at the time JAMP submitted its NDS. Hereinafter, these drugs (DINs 02458349, 02458357, and 02466872) are referred to as the “referenced HUMIRA products”. In its correspondence with Health Canada’s Office of Submissions and Intellectual Property (“OSIP”), and after being told that their NDS was incomplete, JAMP submitted Form Vs on a “without prejudice” basis, yet took the position that it was not required to comply with s 5(1) of the PM(NOC) Regulations, as they were not a “second person” as defined therein because the referenced HUMIRA products had not been marketed in Canada for several years and therefore they were not drugs “marketed in Canada” as required by s 5(1). 5 (1) If a second person files a submission for a notice of compliance in respect of a drug and the submission directly or indirectly compares the drug with, or makes reference to, another drug marketed in Canada under a notice of compliance issued to a first person and in respect of which a patent list has been submitted, the second person shall include in the submission the required statements or allegations set out in subsection (2.1). [Emphasis ours] Health Canada’s Office of Patented Medicines and Liaison (“OPML”) later advised AbbVie of its preliminary view that the referenced HUMIRA products were indeed not currently being marketed in Canada. Therefore, the referenced HUMIRA products did not trigger s 5(1) of the PM(NOC) Regulations. However, AbbVie argued that JAMP nevertheless made reference to a drug product they marketed in Canada, thus falling within s 5(1) of the PM(NOC) Regulations. Namely, AbbVie argued that JAMP SIMLANDI indirectly made reference to their HUMIRA 20 mg/0.2 mL pre-filled syringe because both products had the same drug concentration (i.e., 100 mg/mL). Hence, the issue was to determine whether a second person seeking approval for a drug with a specific dosage strength could be considered to indirectly refer to a “drug marketed in Canada” with another dosage strength but having the same concentration. The Minister’s Decision After reviewing submissions from both parties, the OPML issued its final decision on December 23, 2021, in which it confirmed its preliminary determination that JAMP was not a second person for the purposes of s 5(1) of the PM(NOC) Regulations, and the corresponding obligations did not arise unless the second person’s NDS “directly or indirectly compares the drug with, or reference” to “another drug marketed in Canada”. The OPML found that “another drug marketed in Canada” must be interpreted to be specific with respect to strength, dosage form, and route of administration (i.e., it is DIN-specific).” The Minister found that the “indirect” comparison of s 5(1) did not expand the scope of the drugs for which a second person must address the patents listed on the Patent Register beyond the DIN-specific “another drug”. Hence, the HUMIRA 20 mg/0.2 mL pre-filled syringe marketed by AbbVie was not a proper reference product for JAMP’s 40 mg/0.4 mL pre-filled syringe, 40 mg/0.4 mL auto-injector pen, and 80 mg/0.8 mL pre-filled syringe. Accordingly, on January 5, 2022, the Minister issued NOCs to JAMP and JAMP launched its products on April 13, 2022. Subsequently, AbbVie sought judicial review of these two related decisions of the Minister, the result of which is the presently-discussed Federal Court decision. Ultimately, the Federal Court agreed with the Minister. Specifically, the Federal Court concluded that inter alia the following findings by the Minister were reasonable: that the term “another drug” in s 5(1) of the PM(NOC) Regulations is confined to the drug products identified by Health Canada, and that these products must have an identical dosage form, strength, and route of administration to the drug product of the second person. that s 5(1) of the PM(NOC) Regulations applies only where a second person files a submission for an NOC that (1) directly or indirectly compares its drug, or makes reference to “another drug”, (2) that other drug is marketed in Canada under an NOC issued to a first person, and (3) that other drug is a drug in respect of which the first person has submitted a patent list; that a drug that is not marketed is not eligible for the protections under the PM(NOC) Regulations; and that JAMP was not a second person under s 5(1) for the simple reason that AbbVie was not marketing in Canada the HUMIRA drugs that JAMP relied on for its NDS. Conclusion The Minister's decisions, as well as the Federal Court's finding that they were reasonable (pending any appeal), emphasizes one of the statutory objectives of the PM(NOC) Regulations, namely to provide a patent enforcement mechanism only in relation to products that are in fact available to Canadians. This also clarifies certain practical effects of this statutory objective, namely that the enforcement mechanism of the PM(NOC) Regulations is only available to an innovator that markets its innovative drug in Canada, and that s 5(1) of the PM(NOC) Regulations applies only to reference drug products that are identical down to a DIN-specific level with the drug to be approved. However, this does not mean that innovators are entirely without recourse when it comes to drugs they are not marketing in Canada. Under such circumstances, while innovators may not be able to utilize the PMNOC Regulations to prevent a NOC from being issued to a competitor, it can nonetheless commence normal patent infringement proceedings in Federal Court.   A copy of this decision, AbbVie Corporation v. Canada (Health), 2022 FC 1209, is available here.   Our intellectual property team would be happy to help you with any questions you may have regarding the PM(NOC) Regulations.

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  • Sales without legal warranty at the buyers’ risk: Clarity is key

    On July 15, 2022, Justice François Lebel of the Court of Québec rendered a decision1 confirming that, in the case of the sale of immovable property, a clear and unambiguous exclusion clause, whereby the warranty is waived at the buyer’s risk, results in a break in the chain of title preventing the buyer from taking any legal action under such warranty against the seller and previous sellers. Justice Lebel thus declared the originating application against the defendants Marshall and Bergeron inadmissible and dismissed the call in warranty. This decision is consistent with the recent decision of the Court of Appeal of Quebec in Blais,2 rendered in May 2022, which clarified the state of the law on the consequence of waiving a legal warranty where successive sales are involved. The facts In March 2009, the defendant Bergeron sold an income property (hereinafter the “Property”) to the defendants, the Marshalls, with a legal warranty of quality. In May 2012, the Marshalls in turn sold the Property to the defendants Hamel and Drouin, still with a legal warranty of quality. In December 2016, the defendants Hamel and Drouin resold the Property to the plaintiff, but this time [translation] “without legal warranty of quality, at the buyer’s risk, but with warranty of ownership”. In the fall of 2020, the plaintiff had work done to repair the drain tile system. It was at that point that it discovered the presence of petroleum hydrocarbons in the soil under the Property’s foundation, rendering the soil unsuitable for residential use. According to an expert report, the alleged contamination stemmed from a heating oil tank once located in a shed behind the Property. The tank was apparently removed before the sale in December 2016. The plaintiff was seeking a reduction in the sale price and to have the defendants Hamel and Drouin, as well as the two previous sellers, the defendants Marshall and Bergeron, held solidarily liable. The plaintiff referred to the warranty of quality provided for in articles 1726 and following of the Civil Code of Québec (C.C.Q.) and the warranty against public law restrictions provided for in article 1725 C.C.Q. The plaintiff also claimed to be the victim of fraud on the part of the defendants Hamel and Drouin. After being called in warranty by the defendants Hamel and Drouin, the Marshalls moved to dismiss the substantive claim and the action in warranty. They claimed that the sale of the Property between the defendants Drouin and Hamel and the plaintiff was made at the buyer’s risk and that such a clause in a subsequent deed of sale irrevocably breaks the chain of title, thereby preventing the plaintiff from taking any legal action against the seller and previous sellers. The law and the importance of a clear clause According to article 1442 C.C.Q., which codifies the principles arising from the decision in Kravitz,3 buyers may seek to have the sellers previous to their own seller held liable. However, for such an action to be deemed valid, it must be established that: The defect existed at the time that the previous sellers owned the immovable; and The right to the legal warranty was transferred to the plaintiff through subsequent sales. Indeed, the buyer of an immovable may take legal action directly against a previous seller in accordance with article 1442 C.C.Q. However, this article presupposes that the right to the legal warranty was passed on from one owner to the next, right down to the current buyer seeking to file a claim for latent defects. In other words, the legal warranty must have been transferred to each owner through the chain of title. In Blais, the Court of Appeal confirmed that an unambiguous warranty exclusion clause results in a break in the chain of title. Such a clause prevents the buyer of an immovable from taking legal action directly against the former owners who sold the immovable with a legal warranty. Given the decision in Blais, it is now clear that such a clause waiving the legal warranty closes the door to any direct recourse against a seller’s predecessors, even if such predecessors sold the immovable with a legal warranty.4 In these circumstances, a buyer who acquires an immovable at their own risk will be deprived of their right to take legal action directly against the previous sellers, insofar as the warranty exclusion clause in the deed of sale is clear and unambiguous. In this case, Justice Lebel considered that the wording of the warranty exclusion clause in the deed of sale, which was binding on the plaintiff, was clear and unambiguous, and that a sale at the buyer’s “risk” excludes both the warranty of quality and the warranty of ownership, which covers the public law restrictions of article 1725 C.C.Q. Justice Lebel indicated that there was a break in the chain of title resulting from the sale at the buyer’s risk and that the plaintiff could not claim that it was still entitled to take legal action directly against any sellers other than the defendants Hamel and Drouin. He therefore ruled in favour of the defendants Marshall and Bergeron and declared the originating application against them inadmissible. Key takeaways A warranty exclusion clause in a deed of sale will only be deemed valid if it is clear and unambiguous. The mention that a sale is made “at the buyer’s risk” completely eliminates the warranty of quality provided for in article 1726 C.C.Q. and the warranty of ownership provided for in article 1725 C.C.Q. A deed of sale containing a valid warranty exclusion clause AND a mention that the sale is made “at the buyer’s risk” precludes any recourse by the buyer against the seller, but also against previous sellers. With the current state of the Quebec real estate market, the decision in Hamel, which ties in with the Court of Appeal’s teachings in Blais, certainly clarifies how case law established in recent years should be applied, in particular as concerns the effect of a warranty exclusion clause on successive sales. The members of our Litigation and Dispute Resolution group are available to advise you and answer your questions. 9348-4376 Québec inc. c. Hamel, 2022 QCCQ 5217 Blais c. Laforce, 2022 QCCA 858. General Motors Products of Canada Ltd v. Kravitz, [1979] 1 S.C.R. 790 Supra note 1, paras. 6 and 8.

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  • Ten things you should know about the amendments to Quebec’s Charter of the French language

    Quebec recently enacted Bill 96, entitled An Act respecting French, the official and common language of Québec, which aims to overhaul the Charter of the French language. Here are 10 key changes in this law that will impose significant obligations on businesses: As of June 1, 2025, businesses employing more than 25 people (currently the threshold is 50 people) for at least six months will be required to comply with various “francization”1 obligations. Businesses with between 25 and 99 employees may also be ordered by the Office québécois de la langue française (the OQLF)2 to form a francization committee. In addition, at the request of the OQLF, businesses may have to provide a francization program for review within three months. As of June 1, 2025, only trademarks registered in a language other than French (and for which no French version has been filed or registered) will be accepted as an exception to the general principle that trademarks must be translated into French. Unregistered trademarks that are not in French must be accompanied by their French equivalent. The rule is the same for products as well as their labelling and packaging; any writing must be in French. The French text may be accompanied by a translation or translations, but no text in another language may be given greater prominence than the text in French or be made available on more favourable terms. However, as of June 1, 2025, generic or descriptive terms included in a trademark registered in a language other than French (for which no French version has been registered) must be translated into French. In addition, as of June 1, 2025, on public signs and posters visible from outside the premises, (i) French must be markedly predominant (rather than being sufficiently present) and (ii) the display of trademarks that are not in French (for which no French version has been registered) will be limited to registered trademarks. As of June 1, 2022, businesses that offer goods or services to consumers must respect their right to be informed and served in French. In the event of breaches of this obligation, consumers have the right to file a complaint with the OQLF or to request an injunction unless the business has fewer than five employees. In addition, any legal person or company that provides services to the civil administration3 will be required to provide these services in French, including when the services are intended for the public. As of June 1, 2022, subject to certain criteria provided for in the bill, employers are required to draw up the following written documents in French: individual employment contracts4 and communications addressed to a worker or to an association of workers, including communications following the end of the employment relationship with an employee. In addition, other documents such as job application forms, documents relating to working conditions and training documents must be made available in French.5 As of June 1, 2022, employers who wish to require employees to have a certain level of proficiency in a language other than French in order to obtain a position must demonstrate that this requirement is necessary for the performance of the duties related to the position, that it is impossible to proceed using internal resources and that they have made efforts to limit the number of positions in their company requiring knowledge of a language other than French as much as possible. As of June 1, 2023, parties wishing to enter into a consumer contract in a language other than French, or, subject to various exceptions,6 a contract of adhesion that is not a consumer contract, must have received a French version of the contract before agreeing to it. Otherwise, a party can demand that the contract be cancelled without it being necessary to prove harm. As of June 1, 2023, the civil administration will be prohibited from entering into a contract with or granting a subsidy to a business that employs 25 or more people and that does not comply with the following obligations on the use of the French language: obtaining a certificate of registration, sending the OQLF an analysis of the language situation in the business within the time prescribed, or obtaining an attestation of implementation of a francization program or a francization certificate, depending on the case. As of June 1, 2023, all contracts and agreements entered into by the civil administration, as well as all written documents sent to an agency of the civil administration by a legal person or by a business to obtain a permit, an authorization or a subsidy or other form of financial assistance must be drawn up exclusively in French. As of September 1, 2022, a certified French translation must be attached to motions and other pleadings drawn up in English that emanate from a business or legal person that is a party to a pleading in Quebec. The legal person will bear the translation costs. The application of the provisions imposing this obligation has, however, been suspended for the time being by the Superior Court.7 As of September 1, 2022, registrations in the Register of Personal and Movable Real Rights and in the Land Registry Office, in particular registrations of securities, deeds of sale, leases and various other rights, must be made in French. Note that declarations of co-ownership must be filed at the Land Registry Office in French as of June 1, 2022. The lawyers at Lavery know Quebec’s language laws and can help you understand the impact of Bill 96 on your business, as well as inform you of the steps to take to meet these new obligations. Please do not hesitate to contact one of the Lavery team members named in this article for assistance. We invite you to consult the other articles concerning the modifications made to Quebec’s Charter of the French language: Trademarks and Charter of the French language: What can you expect from Bill 96? Amendments to the Charter of the French Language: Impacts on the Insurance Sector “Francization” refers to a process established by the Charter of the French language to ensure the generalized use of French in businesses. The OQLF is the regulatory body responsible for enforcing the Charter of the French language. The civil administration in this law includes any public body in the broad sense of the term. An employee who signed an individual employment contract before June 1, 2022, will have until June 1, 2023, to ask their employer to provide them with a French translation if the employee so wishes. If the individual employment contract is a fixed-term employment contract that ends before June 1, 2024, the employer is not obliged to have it translated into French at the request of the employee. Employers have until June 1, 2023, to have job application forms, documents related to work conditions and training documents translated into French if these are not already available to employees in French. Among these exceptions are employment contracts, loan contracts and contracts used in “relations with persons outside Quebec.” There seems to be a contradiction in the law with regard to individual employment contracts which are contracts of adhesion and for which the obligation to provide a French translation nevertheless seems to apply. Mitchell c. Procureur général du Québec, 2022 QCCS 2983.

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  • Single-Use Plastics Prohibition Regulations: Impact on Businesses

    On June 20, 2022, the federal government registered regulations that, as the name implies, prohibit (or restrict, in some cases) the manufacture, import and sale of certain single-use plastics that pose a threat to the environment. The Regulations will come into force on December 20, 2022, with the exception of certain provisions taking effect in the following months.1 Manufacturing, importing and selling certain single-use plastic products made entirely or partially of plastic, such as foodservice ware, checkout bags and straws, will be soon be prohibited. This regulation is expected to affect more than 250,000 Canadian businesses that sell or provide single-use plastic products, primarily in the retail, food service, hospitality and healthcare industries. The following is a comprehensive list of items that will be prohibited: Single-use plastic ring carriers designed to hold and carry beverage containers together2; Single-use plastic stir sticks designed to stir or mix beverages or to prevent liquid from spilling from the lid of its container3; Single-use plastic foodservice ware (a) designed in the form of a clamshell container, lidded container, box, cup, plate or bowl, (b) designed to serve or transport ready-to-eat food or beverages without further preparation, and (c) made from certain materials4; Single-use plastic checkout bags designed to carry purchased goods from a business and (a) whose plastic is not a fabric, or (b) whose plastic is a fabric that will break or tear, as the case may be, (i) if it is used to carry 10 kg over a distance of 53 m 100 times; (ii) if it is washed in accordance with the washing procedures specified for a single domestic wash in the International Organization for Standardization standard ISO 6330, as amended from time to time5; Single-use plastic cutlery that is formed in the shape of a fork, knife, spoon, spork or chopstick that either (a) contains polystyrene or polyethylene, or (b) changes its physical properties after being run through an electrically operated household dishwasher 100 times6; Single-use plastic straws that either (a) contain polystyrene or polyethylene, or (b) change their physical properties after being run through an electrically operated household dishwasher 100 times7. The main exceptions Single-use flexible plastic straws Single-use flexible plastic straws, i.e. those with a corrugated section that allows the straw to bend and maintain its position at various angles,8 may be manufactured and imported9. These flexible straws may also be sold in any of the following circumstances:  The sale does not take place in a commercial, industrial, or institutional setting10. This exception means that individuals can sell these flexible straws. The sale is between businesses in packages of at least 20 straws.11 The sale is made by a retail store of a package of 20 or more straws to a customer who requests it without the package being displayed in a manner that permits the customer to view the package without the help of a store employee12; The sale of straws is between a retail store and a customer, if the straw is packaged together with a beverage container and the packaging was done at a location other than the retail store13; The sale is between a care facility, such as a hospital or long-term care facility, and its patients or residents14. The export of single-use plastic items - All the manufactured single-use plastic items listed above may be manufactured, imported or sold for export15. That said, any person who manufactures or imports such items for export will be required to keep a record of certain information and documents as appropriate for each type of plastic manufactured item16. Records of the information and documents will have to be kept for at least five years in Canada17. Conclusion: an opportunity to rethink common practices In the short term, businesses will need to start thinking about how they will replace the plastic manufactured items they use. To help businesses select alternatives to single-use plastic items, the federal government has released its Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations.18 According to this document, the aim should be to reduce plastics.  Businesses may begin by considering whether a single-use plastic should be replaced or no longer provided. Only products that perform essential functions should be replaced with non-plastic equivalents. Stir sticks and straws can be eliminated most of the time. Another way to reduce waste is to opt for reusable products and packaging. Businesses are invited to rethink their products and services to provide reusable options. Reusable container programs (i.e. offering customers the option of using their own reusable containers) are a reuse option that businesses may want to consider, in particular to reduce the amount of plastic food containers. Only where reusable products are not feasible should businesses substitute a single-use plastic product with a recyclable single-use alternative. Businesses in this situation are encouraged to contact local recycling facilities to ensure that they can successfully recycle products at their end of life. Ultimately, charging consumers for certain single-use substitutes (e.g. single-use wooden or moulded fibre cutlery) may also discourage their use. Ibid, s. 1 Ibid, s. 3 Ibid, s. 6 Polystyrene foam, polyvinyl chloride, plastic containing black pigment produced through the partial or incomplete combustion of hydrocarbons or oxo-degradable plastic; Ibid. This standard is entitled Textiles – Domestic washing and drying procedures for textile testing; Ibid. Ibid. Ibid, ss. 4 and 5. Ibid, s. 1. Ibid, s. 4. Ibid, para. 5(2). Ibid, para. 5(3). Ibid, para. 5(4); According to Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations, the goal is to ensure that people with disabilities who need flexible single-use plastic straws continue to have access to them at home and can carry them to restaurants and other premises. Ibid, para. 5(5). Ibid, para. 5(6). Ibid, para. 2(2). Ibid., s. 8 Ibid, para. 9(1). https://www.canada.ca/en/environment-climate-change/services/managing-reducing-waste/consultations/proposed-single-use-plastics-prohibition-regulations-consultation-document.html

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  • Amendments to the Charter of the French Language: Impacts on the Insurance Sector

    Bill 96 – An Act respecting French, the official and common language of Québec (the “Act”) - was adopted on May 12, 2022 and assented to on June 1, 2022, its effective date. Certain provisions are already in force; for other provisions, a transitional period ranging from several months to three years will apply. This document provides an overview of the modifications included in the reform of the Charter of the French Language (the “Charter”) that will have an impact on various aspects relevant to insurance sector stakeholders doing business in Québec. Forming the centrepiece of the announced changes, the reform of the Charter includes strengthened oversight mechanisms governing the use of French as the language of commerce and business, as well as linguistic rights in the areas of employment and communications with agents of the State. Overseeing the language of commerce and business The reform of Section 55 of the Charter stipulates that contracts of adhesion and related documents must be drawn up in French. However, effective June 1, 2023, a French-language version of these contracts and documents must be provided to participants First Alinea of this amended section reads as follows: 55. Contracts pre-determined by one party and the related documents, must be drawn up in French. The parties to such a contract may be bound only by its version in a language other than French if, after its French version has been remitted to the adhering party, such is their express wish. The documents related to the contract may then be drawn up exclusively in that other language.1 Therefore, contractual clauses in which the parties simply indicate that they agree to be bound by a contract drawn up in a language other than French are no longer sufficient. The Civil Code of Québec stipulates that “A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable.”2 To qualify a contract, the importance of the negotiated terms and conditions and their connection with the contract must be analyzed. It is generally recognized that if the essential stipulations are not negotiable, the contract is a contract of adhesion, even though some less important terms and conditions may have been negotiated by the parties. This amendment codifies the interpretation adopted by the Office québecois de la langue française (“OQLF”) and the courts,3 particularly given that negotiated contracts were not covered by this provision. To remove any doubt concerning this interpretation, Bill 96 was amended so as not to extend the scope of this requirement to include contracts containing “printed standard clauses”. The insurance contract Since their essential stipulations are typically drawn up by the insurer, insurance contracts and their endorsements are contracts of adhesion, as a general rule. Therefore, the French-language version of all related documents — notices, letters, insurance product summaries — must be provided to clients before they can decide whether they will be bound by a version drawn up in another language. During the parliamentary debates, Minister Jolin-Barette commented that Section 55 of the Charter only referred to consumers and that contracts between two companies could be drawn up in the language of their choice if that was the express wish of both parties. The term “consumer”, however, is not defined in the Charter. Ambiguity remains as to whether the Minister’s comment only referred to contracts containing standard clauses or whether contracts of adhesion were included. We will have to wait for the publication of the interpretation bulletins and the annotated edition of the act to determine whether Section 55 of the Charter applies to commercial insurance policies. In the meantime, we are of the opinion that if Québec lawmakers had wanted to exclude commercial contracts of adhesion, they would have expressly done so by means of an amendment. Insurance contracts in effect before June 1, 2023 will not have to be translated, nor will insurance contracts renewed without modifications since under those circumstances, the contract would not be regarded as a new contract.4 However, if an existing insurance contract is renewed with significant modifications, it will be regarded as a new contract and the French-language version thereof must be provided to clients so they may validly express their wish to be bound by a contract drawn up in a language other than French. Given that in most cases, insurance contracts are sent out to policyholders by regular mail or email, effective June 1, 2023, insurers, agents or brokers, as applicable, will have to send both the French-language and English-language versions of the contract in the same mailing or simply send the French-language version thereof. It is important to note that the Act provides for an exception to the requirement to provide the French-language version if: The insurance policy has no equivalent in French in Québec; and The insurance policy is originates from outside Québec or is not widely available in Québec.5 [unofficial translation] In all likelihood, this exception will only apply to highly specialized insurance products and will be interpreted restrictively given the Act’s primary objective. Unlike insurance contracts and related documents, invoices, receipts, discharge notices and other similar documents may be sent out in English if the French-language version remains available on terms that are at least as favourable.6 Services and marketing in French The Act introduces the Charter’s new Section 50.2, which states that businesses must respect consumers’ fundamental linguistic right to be informed and served in French. The same section reiterates this requirement with respect to “a public other than consumers” to whom are offered goods and services and who must henceforth be informed and served in French by businesses. Unlike consumers, however, clients who are businesses do not enjoy a fundamental linguistic right protected by the Charter. As regards marketing, the addition of the words “regardless of the medium used” to Section 52 of the Charter confirms that marketing documents in “hard copy” format must be in French, as must websites. If a version is available to the public in a language other than French, the French-language version must be available on terms that are at least as favourable. This provision took effect on June 1, 2022. Chat-type platforms or those facilitating direct communications with the insurer should make it possible for members of the public to communicate with the insurer’s representatives in French at all times. Communications with insurance agents and brokers Effective June 1, 2022, insurers are required to communicate in French with insurance agents and brokers who express the desire to do so.7 In addition, all information documents sent to insurance agents and brokers regarding underwriting or claims must be in French if they so wish. As regards contractual agreements between insurers,  insurance agents  and brokers, the need to provide a French-language version depends on the nature of the contract, i.e. whether it can be qualified as a contract of adhesion. French in the workplace Effective June 1, 2022, all companies doing business in Québec must comply with the following requirements in the area of employment rights: Respect employees’ right to work in French8; Use French in all written communications sent to employees; Ensure that all offers of employment, promotion or transfer; individual employment contracts; employment application forms; and documents concerning employment conditions and training sent to employees are drawn up in French;9 Take all reasonable means to avoid requiring employees to have knowledge  or a specific level of knowledge of a language other than French for employees to obtain employment or to maintain their position, including in particular:   Assess the actual needs associated with the duties to be performed; Make sure that the language knowledge already required from other staff members was insufficient for the performance of those duties; Restrict as much as possible the number of positions involving duties whose performance requires knowledge of or a specific level of acknowledge of a language other than French.10 It should be noted that individuals whose employment contracts are currently drawn up in English have until June 1, 2023, to ask their employer to translate their contract. Effective June 1, 2025, businesses with 25 employees or more in Québec must meet additional francization requirements for their Québec employees to obtain a francization certificate, including: Registering with the OQLF; Submitting an analysis of the status of the French language within the business; Putting in place a francization program within three months following an OQLF request to that effect. The above requirements were already in effect for businesses with more than 50 employees in Québec. French as the language of the civil administration The Act includes various modifications with respect to French as the language of the civil administration. The Québec government will be required to make exemplary and exclusive use of French, with certain exceptions. Effective June 1, 2023, all agents of the State and provincial government bodies will be required to communicate in French with all persons, including business representatives. All documents exchanged with the civil authorities, as well as all contracts and permits, must be drawn up in French. Insurance sector stakeholders outside Québec should expect to receive more communications in French from the Autorité des marchés financiers (“AMF”) given that the AMF is a body of the “civil administration”. Penalties It should be noted that new powers will be granted to the OQLF enabling it to conduct investigations and impose administrative and disciplinary penalties. As regards infractions of the Charter’s provisions, the Act provides for fines ranging from $3,000 to $30,000 for businesses and from $700 to $7,000 for individuals. These fines are doubled for a second offence and tripled for further offences. In addition, if an infraction continues for more than one day, each day constitutes a separate infraction. If an infraction is committed by a corporate director or officer, the Act provides for fines ranging from $1,400 to $14,000. Questions of interpretation Various provisions have raised questions of interpretation that are still difficult to resolve at the time of writing. Interpretation bulletins and an annotated edition of the act will be published by the provincial government with a view to guiding businesses in the application of the Act; they will also help to clarify certain provisions that remain ambiguous for the time being. For further information on changes concerning trademarks, please consult a recent publication by our colleagues specializing in intellectual property. Sec. 55, Para. 1 of the Charter. Civil Code of Québec, CQLR ch. CCQ-1991, Sec. 1379, Para. 1. Westboro Mortgage Investment vs. 9080-9013 Québec inc., 2018 Superior Court of Québec 1. Leave to appeal dismissed 2019 Court of Appeal of Québec 1599. Didier LLUELLES, Droit des assurances terrestres, 6th ed., Montréal, Éditions Thémis, 2017, Para. 186. Sec. 21.5 and Sec. 55 of the Charter. Sec. 57 of the Charter. Sec. 50.2 of the Charter. Sec. 5 and Sec. 50.2 of the Charter. Sec. 41 of the Charter. Sec. 46 of the Charter.

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  • Trademarks and Charter of the French language: What can you expect from Bill 96?

    On May 13, 2021, the Quebec government introduced Bill 96 to amend the Charter of the French language (the “Charter”) to strengthen the provisions regarding the use of French, particularly with respect to the language of commerce and business. This bill has been thoroughly reviewed in parliamentary committee and the committee tabled its report on April 26. In the current political context, it is expected that Bill 96 will be adopted in the coming months. The final form of the bill and its coming into force have yet to be determined. However, we can already anticipate that the timeframe for compliance with these new rules will be three years following assent of the Bill.1 The bill provides for a number of changes to the Charter, including amendments with respect to trademarks, which currently benefit from an exception. Under this exception, businesses may currently use a trademark in a language other than French in Quebec, provided that the French version of the trademark has not been registered. Since 2019, sufficient French must be present in public signage outside a building when a trademark is used in a language other than French.2 Under Bill 96, it will still be possible to use a trademark in a language other than French on products, in commercial publications and on public signage and commercial advertising in Quebec. However, the conditions for benefiting from this exception under the Charter will be modified and deserve not only attention, but also action! Start by reading the following. If you use a trademark in a language other than French in Quebec or if you plan to do so, you must first make sure that this trademark is registered.3 You will also need to review the public signage outside your premises, to comply with the new requirement of a markedly predominance presence of French.4 Finally, you will need to revise your product labels and packaging if your registered trademarks contain descriptive or generic terms in a language other than French.5 In such a case, you may have to modify your packaging and labels to add a French translation of these terms. It should be noted that the Charter applies to businesses with an establishment in Quebec, but also possibly to businesses based outside Quebec, insofar as their website is intended to perform a commercial act on Quebec territory. With respect to websites, the current practice of the Office québécois de la langue française (“OQLF”) is to intervene only in cases where the business has an establishment in the province of Quebec. If the enterprise communicating  with Quebec customers does not have an establishment there, the OQLF favours an incentive approach.6 The future will tell  whether this practice  will be maintained once the Charter is amended.There is no doubt that foreign companies that are the subject of a complaint in this regard will be given time to translate their website into French in order to avoid the sanctions that will be more severe under the new rules. Let’s take a closer look at what each of the proposed changes means, should the bill be passed in its current form. Change #1: French to be markedly predominant on public signage outside the premises Bill 96 replaces the requirement of the sufficient presence of French with a requirement of markedly predominance of French visible from the exterior of the premises.7 Currently, the markedly predominance of French is assessed within the parameters set out in the Regulation defining the scope of the expression “markedly predominant” for the purposes of the Charter of the French Language. According to this regulation, the presence of French is considered markedly predominant if the French text has a much greater visual impact than the text in the other language (i.e. twice as large). It will be interesting to see if these rules will be maintained or if new criteria will be established for the application of Bill 96. The first element to keep in mind with respect to the requirement of the markedly predominance of French under the current law is to disregard the visual impact of the trademark. Indeed, section 1 of the Regulation provides as follows: In assessing the visual impact, a family name, a place name, a trade mark or other terms in a language other than French are not considered where their presence is specifically allowed under an exception provided for in the Charter of the French language (chapter C-11) or its regulations. Thus, as long as the trademark is registered in accordance with the new applicable rules, the visual field occupied by the trademark must be disregarded in assessing whether French is otherwise markedly predominant in the public signage outside the premises. In other words, no modification of your public signage will be required as long as your sign consists of the following: (1) a trademark (registered) in a language other than French and (2) generic or descriptive terms in French. Indeed, the only elements displayed in such a case (apart from the trademark) would be in French. However, if your public signage includes elements in a language other than French, the French should be markedly predominant (i.e. twice as large) in the visual field (excluding the space occupied by the trademark. The regulations set out various presumptions to determine whether the criterion of the much greater visual impact of French is met. In the case of a single poster: the French text will be deemed to have a much greater visual impact if the following conditions are met:8 the space devoted to the French text is at least twice as large as that devoted to the text in another language; the characters used in the French text are at least twice as large as those used in the text written in another language; and the other features of the posters do not reduce the visual impact of the French text. In the case of separate posters of different dimensions: the French text will be deemed to have a much greater visual impact if the following conditions are met:9 the posters bearing the French text are at least as numerous as those bearing the text in the other language; the characters used in the French text are at least twice as large as those used in the text in the other language; and the other features of posters do not reduce the visual impact of the French text. In the case of texts both in French and in another language: the text in French is deemed to have a much greater visual impact if the following conditions are met:10 the posters bearing the French text are at least as numerous as those bearing the text in the other language; the posters bearing the French text are at least twice as large as those with the other language text; the characters used in the French text are at least twice as large as those in the text in the other language; and the other features of the posters do not reduce the visual impact of the French text Finally, it should be noted that the criterion of the markedly predominance of French will also be applied to the trade name of the business, if it is visible from outside the premises and includes an expression from a language other than French.11 Change #2: In order to avoid translation into French, registration of the trademark used in public signage and commercial advertising is mandatory In order to use a trademark in a language other than French, without translation, with regard to public signage and commercial advertising, it will now be required to demonstrate that: the trademark is already registered in Canada; and no corresponding French version appears on the Trademarks Register.12 If these conditions are not met, the trademark will have to be accompanied by a markedly predominant French translation. If you are currently using a brand in a language other than French that is not registered, be quick because the registration process in Canada can easily take three years! Otherwise, you may be required to modify your public signage and commercial advertising to include a markedly predominant French version of the trademark. While it is possible to request an accelerated examination of an application for registration in certain special circumstances (including the fact that a court proceeding is pending), it is far from certain that the Canadian Intellectual Property Office will agree to expedite examination of applications for reasons of compliance with the Charter. It is therefore better not to delay filing your trademarks in order not to expose yourself to the consequences provided under the law. In practical terms, public signage includes any message posted in a place accessible to the public, whether inside or outside the premises, whereas commercial advertising is the expression of a commercial message, regardless of the form. The following examples are considered public display or commercial advertising: signs, posters, billboards, displays, bulletin boards; delivery vehicles, promotional bags, carts, employee uniforms; catalogues, brochures, leaflets, directories and other similar publications; and websites and social media. Change #3 : A trademark used in connection with the products must be registered to avoid French translation In its original form, the bill was silent on the issue of the use of a trademark on a product, suggesting that the status quo would continue to apply, namely that it would still be possible to use a trademark in a language other than French on a product (including its packaging or label), without the need for registration. However, the government has added a provision during the course of the parliamentary work by providing for the obligation to register trademarks in a language other than French, to avoid the addition of a French translation.13 So, no exception for product labels and packaging: make sure you register your trademarks if you have not already done so. Otherwise, you could be forced to withdraw your products from the market and pay fines under the new law, as discussed below. Change #4: Requirement to translate generic and descriptive terms for product trademarks The amendment proposed in parliamentary committee discussed above goes much further than the need to register the trademark and could have a major impact on some businesses by requiring them to modify their packaging and labels  forproducts sold in Quebec. The new section 51.1 of the Charter proposed in parliamentary committee, provides that if the registered trademark (in a language other than French) contains generic or descriptive terms, these will have to be translated into French. 51.1 notwithstanding section 51, on a product, a registered trademark within the meaning of the Trademarks Act (Revised Statutes of Canada, 1985, chapter T-13) may be, even in part, solely in a language other than French where there is no corresponding version in French on the register kept under that Act.However, if generic or descriptive terms of the product are included in such trademark, they must appear in French on such product or on a medium permanently attached to it. (emphasis added) A reading of the Committee’s work provides a better understanding of the purpose of this product-specific rule: the government seems to want to limit the practice of some businesses which register, as a trademark, the label affixed to a product consisting of the main trademark, but also of several descriptive or generic terms, which would otherwise have to be translated to comply with the Charter. The example of the SOFTSOAP trademark was discussed in parliamentary committee. To illustrate this, we reproduce here two examples of registered trademarks for SOFTSOAP products: As the law currently stands, these trademarks may be registered under the Trademarks Act and they comply with the Charter. The owner of these trademarks can therefore rely on the “recognized trademarks” exception and sell its products in Quebec without translating into French the descriptive or generic terms such as “soothing clean,” “aloe vera fresh,” “refill” and “good for 800 dispenses.”  Based on discussions in the parliamentary committee, the government’s concern does not seem to be directed towards the main trademarks, in this instance, SOFTSOAP, but rather towards the registration of purely descriptive terms, which do not, in themselves, have the vocation of a trademark and which nevertheless benefit from the exception of recognized trademarks under the current law.  The regulations will, we hope, clarify the scope of this section 51.1 of the Charter, if it is adopted, by providing that this new requirement does not apply to the main trademarks of products. We also hope that a reasonable period of time will be given to businesses to allow them to change their labels and packaging. Change #5: Complaints, powers and penalties in the event of violation The OQLF is responsible for ensuring compliance with the Charter and its regulations. While it has the authority to identify violations, it mainly acts on complaints from the public. After reviewing a complaint, the OQLF sends an official letter if it judges that there has been a violation and it gives the business a deadline to respond. The OQLF can refer the matter to the Director of Criminal and Penal Prosecutions if the matter is not resolved to its satisfaction, who can in turn bring an action before the Court of Québec. In the event of a conviction, the court determines the amount of the fine to be paid. The OQLF mainly intervenes in cases of violations regarding public signage and websites for businesses with an establishment in Quebec. The bill brings some changes to the handling of complaints. The OQLF will have to inform the complainant of the handling of the complaint and the measures that the OQLF intends to take against the company targeted by the complaint.14 The OQLF will also benefit from new powers as of the assent of Bill 96,15 including: the power to issue orders in case of a breach (removal of products from shelves);16 the power to ask to the Superior Court to issue an injunction for the removal of non-compliant products or the removal or destruction of posters, advertisements, billboards or illuminated signs that contravene the Charter.17 Finally, the amount of fines to be paid in the case of a violation is increased as follows:18 individuals: $700 to $7,000; legal persons: $3,000 to $30,000. The bill provides that the amount of the fines doubles for a first recidivism offence and triple for any subsequent offence.19 The amount increases with each day the violation continues, with each day counted as a separate violation.20 Conclusions: What to do to prepare yourself for the entry into force of Bill 96? In practice, the requirement of having a registered trademark will be problematic for businesses who want to use a non-French trademark in Quebec, without a French translation. To comply with the new rules, businesses will indeed have to delay their launch in the province of Quebec until their mark is registered. As indicated above, registration process may easily take up to three years if not more. Let’s hope that the government will amend Bill 96 to require filing of an application as opposed to trademark registration. Businesses that use trademarks in a language other than French have every reason to take the following measures right now:  List all trademarks used in a language other than French (including slogans) as well as those to be used in upcoming projects; Consult a trademark expert to determine the best strategy, including clearance searches to ensure that these trademarks are registrable; File trademark applications quickly, given the lengthy registration process in Canada (i.e. a minimum of three years),. A review of product labels and packaging should also be initiated to ensure compliance with the new rules, once the bill is passed. Finally, public signage outside the premises will also have to be reviewed insofar as a language other than French is used, apart from the trademark. A proactive approach will allow you to avoid costs related to the addition of a French translation in public signage, advertising and labelling of your products and services and, moreover, to avoid fines in the event of non-compliance with the new rules. Ready, Set, Register! Bill 96, article 201 paragraph 5 Regulation respecting the language of commerce and business, section 25.1 Bill 96, article 47 Bill 96, article 47 Bill 96, article 42.1 10 legal questions about the Charter of the French Language, websites and social media accounts, Question 3 and Question 6; Les médias sociaux et la Charte de la langue française – Guide pratique à l’intention des entreprises, https://www.oqlf.gouv.qc.ca/francisation/entreprises/guide-medias-sociaux.pdf, pages 7 and 8 Bill 96, article 47 Regulation defining the scope of the expression “markedly predominant” for the purposes of the Charter of the French language, section 2  Regulation defining the scope of the expression “markedly predominant” for the purposes of the Charter of the French language, section 3  Regulations defining the scope of the expression “markedly predominant” for the purposes of the Charter of the French language, section 4 Bill 96, article 48 Bill 96, article 47 Bill 96, article 42.1 Bill 96, article 107 Bill 96, article 201 Bill 96, article 113 (177) Bill 96, article 113 (184) Bill 96, article 114 (205) Bill 96, article 114 (206) Bill 96, article 114 (208)

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  • Celebrating youth innovation!

    This year’s World IP Day is upon us, with the theme “IP and Youth: Innovating for a Better Future”. In honor of this theme (and at the risk of making our adult readers feel a bit less accomplished), we thought it would be appropriate to highlight some of these wonderful inventions of young, innovative minds. US 8,371,246: Device for drying pets  In 2011, 9-year-old Marissa Streng invented a device to more effectively dry her pet dog Mojo after his baths. The product is now apparently sold under the brand Puff-N-Fluff. US 7,726,080: Under-floor storage   At the age of 14, Rebecca Hyndman patented an under-floor storage system intended for use in locations where tile floors are normally used, such as in kitchens and in bathrooms. As a result of this achievement, she was given the honor of introducing President Obama at the Thomas Jefferson High School for Science and Technology, immediately prior to his signing the America Invents Act into law. US 6,029,874: Article carrying device for attachment to a bicycle for carrying baseball bats, gloves and other sports equipment or objects   Biking to baseball practice can be quite the challenge when one has to carry both a bat and a glove simultaneously. From this problem sprang the “Glove and Battie Caddie”, invented by Austin Meggitt at the age of eleven. The Glove and Battie Caddie holds a baseball, bat, and glove on the front of a bike. US 7,374,228: Toy vehicle adapted for medical use   At the age of 8, young Spencer Whale invented a toy vehicle adapted for transporting a child and their required medical equipment. According to the patent, the toy allows children who are hooked up to medical equipment to move more freely around a hospital, with the intention of making their stay more enjoyable. US 5,231,733: Aid for grasping round knobs   One of the youngest people to obtain a patent was Sydney Dittman of Houston, Texas. In 1992, when Sydney was only 2 years old, she invented a tool out of parts of her toys in order to open kitchen drawers that her parents had told her to stay out of. Upon noticing that the device would be great for handicapped people to use, her father started the patenting process, and the resulting patent issued when Sydney was only 4 years old. Please join us to celebrate youth innovation on this World IP Day!

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  • A False Sense of Cybersecurity?

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

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  • Do you know your open-source licences?

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

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

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

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  • Further Streamlining of Canadian Patent Examination on the Horizon

    Canadian Patent Practice has undergone several changes in recent years, in many cases to fulfill the requirements of various international treaties/agreements, including those of the Patent Law Treaty (PLT) and the Comprehensive Economic and Trade Agreement (CETA). On July 3, 2021, the Canadian government published proposed amendments to the Patent Rules, primarily to further streamline Canadian patent examination to pave the way for a future patent term adjustment (PTA) system in Canada as per the Canada-United States-Mexico Agreement (CUSMA), as well as to bring Canadian practice in line with upcoming Patent Cooperation Treaty (PCT) sequence listing requirements. The proposed amendments have been published for a 30-day consultation period and may be subsequently modified. Therefore, it is unknown which of the proposed changes will be retained and in what form, and when the final version of the amended Rules will come into force. However, the proposals provide a preview of the types of changes being considered by the Canadian Intellectual Property Office, which notably include the following: Excess claim fees Like many jurisdictions, Canada is considering the introduction of government fees for excess claims. The proposal is a fee on the order of $100 CAD for each claim beyond 20 claims, which will be payable when requesting examination, and will be re-assessed upon allowance to determine if further claim fees are due when paying the final fee based on changes in the number of claims during examination. It will thus be prudent to voluntarily amend the claims prior to or when requesting examination to control such fees. Request for Continued Examination (RCE) The objective of the new system is to reduce the pendency of patent applications, with a goal of putting an application in condition for allowance with no more than three Examiner’s reports. Continuing examination beyond three reports would require the filing of an RCE, which would entitle the Applicant to up to two further Examiner’s reports. The filing of an RCE is also proposed for returning an allowed case to examination, which would replace the current (and relatively recent) mechanism to withdraw an application from allowance. The proposed RCE fee is on the order of $816 CAD. Conditional Notice of Allowance (CNOA) Rather than issuing further Examiner’s reports relating to any outstanding formalities, the Canadian Intellectual Property Office will have a new tool to issue a CNOA, indicating that the application is in condition for allowance as long as certain outstanding minor defects are corrected. This provides a more efficient path for Applicants in such situations to both correct the defects and pay the final fee, following which the case would proceed to grant. New PCT Sequence Listing Standard In view of the upcoming introduction (on January 1, 2022) of the new PCT “ST.26” sequence listing standard, Canada plans to bring its sequence listing requirements in line with those of the PCT, which will similarly be adopted by patent offices around the world. Housekeeping matters Otherwise, the proposed amendments aim to provide greater flexibility for Applicants in certain areas such as the correction of various types of errors and fee payments, notably in view of the practical application of recent changes to Canadian patent practice gleaned since they came into force in late 2019. Stay Tuned! As noted above, the final form and timing of the upcoming changes are unknown. Please stay tuned for upcoming news in due course, and do not hesitate to contact a member of our patent team for guidance through the ultimate transition.

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  • Steps to a successful venture capital financing round

    An entrepreneur who invests time and energy raising the funds necessary to launch a startup, usually from family and friends (love money), will necessarily want their startup to grow exponentially. Achieving exponential growth requires always more capital, and so the entrepreneur will need to find additional sources of financing. One of these could be venture capital financing. For an entrepreneur, going this route may seem daunting, but if well prepared, it can also be a very wise choice. Here are the steps to take in order to succeed in a round of venture capital financing and get the most leverage out of this type of financing. What is venture capital? Venture capital is a non-guaranteed equity investment, made with an investment horizon of typically five to ten years, with a view to realizing an exponential gain and participating in the strategic decisions of the startup in which the capital is invested. Investors who provide venture capital do not undertake to play a passive role—quite the opposite! Entrepreneurs who opt for such financing must be prepared to exchange ideas with investors and justify certain decisions they intend to make as managers. On the flip side, they’ll also benefit from their investors’ advice and networks. Application for financial assistance Once you’ve grasped how venture capital works and resolved to resort to it, you’re ready to launch a round of financing with one or more potential investors. Our advice: don’t wait until you really need the funds to take this step. As soon as your startup takes off, get into networking mode! Meet with dozens of investors and present your vision, team and business plan. Investors will be more interested in your vision, talent and the growth potential of your business than in its current results, and they will probably be as much interested in these aspects as they are in your business plan. And if things don’t immediately go your way, don’t give up! Often all it takes is for one investor to bet on you for others to follow. Letter of intent If the ?nancing round is well received, investors will con?rm their interest by submitting a letter of intent. A letter of intent states an investor’s intention to invest under certain conditions, but it doesn’t constitute a binding undertaking. It will set out the terms and conditions of the proposed investment (form of investment, subscription price, etc.) which, while not binding on the investor, are nonetheless binding on the company once it has accepted them. Once an entrepreneur has accepted a letter of intent, it may be very dif?cult to get the investor to waive the rights granted in their favor by the letter. Due diligence Once the letter of intent is agreed to, the investor will conduct a due diligence review on the company. A due diligence investigation allows an investor to better assess the legal, ?nancial and other risks associated with a startup and validate certain statements or assumptions stated in the company’s business plan. In a due diligence review, the following will usually be scrutinized, among others : Accounting and corporate records Material contracts Intellectual property (patents, trademarks, etc.) Disputes involving the company Environmental aspects Negotiation of final agreements Generally speaking, in venture capital ?nancing, two main acts key documents will con?rm the terms of the agreement between the company and the investor: a subscription agreement and a shareholders’ agreement. A subscription agreement is a document similar to a share purchase agreement, except that it isn’t concluded with a shareholder but with the company itself. It speci?es the form of the subscription (common shares, preferred shares, subscription rights, etc.) and contains numerous representations and warranties on the part of the company for the bene?t of the investor, as well as an undertaking to indemnify the investor should one of the representations or warranties prove to be false and cause a loss for the investor to suffer prejudice. A shareholders’ agreement is a document signed by all the shareholders of a company and the company itself. Typically, such an agreement determines who will sit on the board of directors and how it will operate. It contains a number of clauses that govern the issuance and transfer of the company’s shares and grants the investor a right of oversigh —and often even veto power—over certain decisions. Closing Once the ?nal agreements are negotiated, closing can take place. At the closing, the parties will sign all relevant documents agreements and certi?cates, including the subscription agreement and shareholders’ agreement, and deliver the documents required to meet all conditions. The parties will also sign the subscription agreement and shareholders’ agreement. The company’s lawyers will provide a legal notice opinion to con?rm to the investors that the securities subscribed to are validly issued, that the company has the legal capacity to enter into all the agreements prepared by the investor’s legal counsel, that the agreements have been duly approved, and that the signatory has the authority to sign the agreements and bind the company. A forewarned entrepreneur is forearmed! You now understand that for an entrepreneur, the secret of a successful ?nancing round lies in being properly prepared, being realistic about investors’ expectations and requirements, and having a large dose of con?dence in the business. If you’ve started to solicit ?nancing from potential investors or are planning to do so soon, there’s still time to get legal advice to avoid unpleasant surprises at a critical moment.

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