The Cassels Brock ReportThe Cassels Brock Report - July 2010Published: 07/28/2010 By Casey Chisick, Bernice Karn, John McKeown, Stephen I. Selznick In This Issue
Copyright ReformBy John McKeown After a lengthy period of consultation, the Government has introduced Bill C-32, an act to amend the Copyright Act (the “Bill”), formally referred to as the Copyright Modernization Act, on June 2, 2010. It appears from the preamble to the Bill that one of the primary purposes in introducing it, is compliance with Canada’s international obligations under the World Intellectual Property Organization Copyright Treaty and the World Intellectual Property Organization Performances and Phonograms Treaty. The Bill is in the First Reading stage and will progress through Parliament in the next few months. No doubt it will be subject to significant debate and potential changes. The following is a summary of some of the proposed amendments: A New Distribution Right The Bill adds a new distribution right. Copyright will include the new sole right in the case of a work that is in the form of a tangible object, to sell or otherwise transfer ownership of the tangible object, as long as that ownership has never previously been transferred in or outside Canada with the authorization of the copyright owner. Ownership of Copyright in Photographs and Portraits and Related Exception The Copyright Act (the “Act”) will be amended by deleting section 10 and subsection 13(2) so that a photographer or painter of a commissioned work will now be the first owner of the copyright in that work. At the same time a new exception will be added in favour of the individual who commissioned the work. It will not be an infringement of copyright for an individual to use for private or non-commercial purposes, or permit the use of for those purposes, a photograph or portrait that was commissioned by the individual for personal purposes and made for valuable consideration, unless the individual and the owner of the copyright in the photograph or portrait have agreed otherwise. Extended Rights for Performer’s Performances and Sound Recordings A performer’s copyright in a performer’s performance will be extended to include the sole right to make a sound recording of a performance available to the public by telecommunication and to sell or otherwise transfer ownership of the sound recording in the form of a tangible object. The same change will be made for a sound recording maker’s copyright in a sound recording. Moral rights will be made available to a performer of a live aural performance or a performance fixed in a sound recording. Extended Liability for Secondary Infringement It will be an infringement of copyright for a person to provide, by means of the Internet or another digital network, a service that the person knows or should have known is designed primarily to enable acts of copyright infringement if an actual infringement of copyright occurs by means of the Internet or another digital network as a result of the use of that service. Subsection 27(2) of the Act dealing with secondary infringement will be amended to provide that for greater certainty, a copy made outside Canada does not infringe copyright under the subsection if, had it been made in Canada, it would have been made under a limitation or exception contained in the Act. Broadened Fair Dealing Exception The exception for fair dealing will be amended so that fair dealing for the purpose of education, parody or satire will not infringe copyright. A New Exception for Non-commercial User-generated Content A new exception for non-commercial user-generated content will be available. It will not be an infringement of copyright for an individual to use an existing work or other subject-matter or copy of one, which has been published or otherwise made available to the public, in the creation of a new work or other subject-matter in which copyright subsists and for the individual — or, with the individual’s authorization, a member of their household — to use the new work or other subject-matter or to authorize an intermediary to disseminate it, if
A New Exception for Reproduction for Private Purposes An exception relating to a reproduction for private purposes will be available. It will not be an infringement of copyright for an individual to reproduce a work or other subject-matter or any substantial part of a work or other subject-matter if
The exception does not apply to the reproductions of musical work embodied in a sound recording, performance of a musical work embodied in a sound recording or a sound recording relating to the above, made onto an audio recording medium as defined by the Act. This existing exception continues to be in place. A New Exception for Fixing Signals and Recording Programs for Later Listening or Viewing An exception relating to time shifting will be available. It will not be an infringement of copyright for an individual to fix a communication signal, to reproduce a work or sound recording that is being broadcast or to fix or reproduce a performer’s performance that is being broadcast, in order to record a program for the purpose of listening to or viewing it later, if
A New Exception for Backup Copies An exception relating to backup copies will be available. It will not an infringement of copyright in a work or other subject-matter for a person who owns - or has a licence to use - a copy of the work or subject-matter (the “source copy”) to reproduce the source copy if
Broadened Exceptions for Educational Institutions Section 29.4 relating to reproduction for instruction will be broadened. It will not be an infringement of copyright for an educational institution or a person acting under its authority for the purposes of education or training on its premises to reproduce a work, or do any other necessary act, in order to display it. A new exception will be made available for education over the Internet. It will not be an infringement of copyright for an educational institution or a person acting under its authority to communicate a lesson to the public by telecommunication for educational or training purposes, if that public consists only of students who are enrolled in a course of which the lesson forms a part or of other persons acting under the authority of the educational institution. A related exemption will be available to an educational institution that has a reprographic reproduction licence under which the institution is authorized to make reprographic reproductions of works in a collective society’s repertoire for an educational or training purpose. It will not be an infringement of copyright for the institution to:
Finally, an educational institution may reproduce, communicate by telecommunication or perform to students for educational or training purposes, a work or other subject-matter that is available through the Internet. The exception does not apply unless the source is mentioned or if the work or other subject-matter — or the Internet site where it is posted — is protected by a technological protection measure that restricts access to the work or other subject-matter or to the Internet site or a clearly visible notice — and not merely the copyright symbol — prohibiting that act is posted at the Internet site where the work is posted or on the work itself. Extended Exceptions for Computer Programs The existing exception in section 30.6 of the Act relating to the reproduction of computer programs will be amended to extend it to those who have a licence to use a copy of a computer program. In addition, exceptions will be added relating to reproductions for the purpose of making the program and any other computer program interoperable, encryption research or assessing the vulnerability of the computer, system or network or of correcting any security flaws. A New Exception for Temporary Reproductions for Technological Processes A new exemption for temporary reproductions for technological processes will be available. It will not be an infringement of copyright to make a reproduction of a work or other subject-matter if
New Exceptions for Network Services Three new exceptions are to be available. First, a person who, in providing services related to the operation of the Internet or another digital network, provides any means for the telecommunication or the reproduction of a work or other subject-matter through the Internet or digital network will not, solely by reason of providing those means, infringe copyright in that work or other subject-matter. The exception does not apply to a service that the person knows or should have known is designed primarily to enable acts of copyright infringement if an actual infringement of copyright occurs by means of the Internet or digital network as a result of the use of that service. Second, a person described above, who caches the work or other subject-matter, or does any similar act in relation to it, to make the telecommunication more efficient will not, by virtue of that act alone, infringe copyright in the work or other subject-matter. Finally, a person who, for the purpose of allowing the telecommunication of a work or other subject-matter through the Internet or another digital network, provides digital memory in which another person stores the work or other subject-matter will not, by virtue of that act alone, infringe copyright in the work or other subject-matter. Notice Provisions for Providers of Network Services or Information Location Tools A “notice and notice” system will be implemented relating to providers of network services, digital networks or information location tools. “Information location tool” means any tool that makes it possible to locate information that is available through the Internet or another digital network and presumably would include search engine operators. An owner of the copyright in a work or other subject-matter may send a notice of claimed infringement to a person who provides such services in proscribed form. A provider who receives the notice must
The copyright owner’s only remedy against a person who fails to perform his or her obligations concerning the matters set out above will be statutory damages in an amount that the court considers just, but not less than $5,000 and not more than $10,000. In any proceedings for infringement of copyright, the owner of the copyright in a work or other subject-matter will not be entitled to any remedy other than an injunction against a provider of an information location tool that is found to have infringed copyright by making a reproduction of the work or other subject matter or by communicating that reproduction to the public by telecommunication. A New Exception for the Benefit of Persons with Print Disabilities An exception will be added for the benefit of persons with a print disability. A “print disability” is defined to mean a disability that prevents or inhibits a person from reading a literary, musical or dramatic work in its original format. Subject to limitations set out in the Act and proposed regulations, it will not be an infringement of copyright for a non-profit organization acting for the benefit of persons with a print disability to make a copy, in a format specially designed for persons with a print disability, of a work and to send the copy to a nonprofit organization in another country for use by persons with print disabilities in that country. Statutory Damages The exposure to statutory damages for infringement for non-commercial purposes will be reduced. In this context the range of statutory damages will be in a sum of not less than $100 and not more than $5,000 that the court considers just, with respect to all infringements involved in the proceedings for all works or other subject-matter. New Protection for Technological Protection Measures Measures to provide protection and remedies against the circumvention of technological protection measures will added to the Act. “Technological protection measure” means any effective technology, device or component that, in the ordinary course of its operation,
No person shall circumvent a technological protection measure, offer services which are primarily for the purposes of circumventing a technological protection measure or manufacture, import, distribute, offer for sale or rental or provide — including by selling or renting — any technology, device or component which is designed or produced primarily for the purposes of circumventing a technological protection measure. The owner of the copyright in a work, a performer’s performance fixed in a sound recording or a sound recording, subject to exceptions set out in the Act and any regulations, will be entitled to all remedies — by way of injunction, damages, accounts, delivery up and otherwise — that are or may be conferred by law for the infringement of copyright against the person who contravened the above prohibition. However, the owner will not be entitled to recover statutory damages from an individual who circumvented a technological protection measure only for his or her own private purposes. The prohibition will not apply if a technological protection measure is circumvented for:
It is also proposed to add criminal remedies relating the circumvention of technological protection measures. Every person, except a person who is acting on behalf of a library, archive or museum or an educational institution, will be guilty of an offence if he knowingly and for commercial purposes contravenes section 41.1 and is liable
New Protection for Rights Management Information Measures to provide protection and remedies against the removal or altering of rights management information in electronic form will also to be added to the Act. “Rights management information” means information that
No person shall knowingly remove or alter any rights management information in electronic form without the consent of the owner of the copyright in the work, the performer’s performance or the sound recording, if the person knows or should have known that the removal or alteration will facilitate or conceal any infringement of the owner’s copyright or adversely affect the owner’s right to remuneration under section 19 of the Act. The owner will be, subject to the Act, entitled to all remedies — by way of injunction, damages, accounts, delivery up and otherwise — that are or may be conferred by law for the infringement of copyright against a person who contravenes the prohibition and those who subsequently deal with the protected subject matter who know or should have known that the rights management information has been removed or altered in a way that would give rise to a remedy under the prohibition. Protection of Geographical IndicationsBy John McKeown A recent decision of the Federal Court deals with a geographical indication (“GI”) and illustrates the problems that can occur concerning their protection. A GI is a type of trade-mark that is intended to designate product quality, highlight brand identity as well as preserving cultural traditions. Examples of GIs include COGNAC, BEAUJOLAIS, and PROSCIUTTO DI PARMA. Problems occur when a GI is protected in one region but is in common usage in another. The Facts In the case in issue, the Ministry of Commerce and Industry of the Republic of Cypress (“Cypress”) applied to obtain a certification mark for the trade-mark HALLOUMI in association with cheese. Certification Marks A certification mark is a specialized type of trade-mark used to distinguish wares which comply with a defined standard in contrast to a trade-mark which is used to distinguish wares of the owner from the wares of others. A certification mark may be adopted and registered only by a person who is not engaged in the manufacture or sale of the wares in issue. The owner of the mark may licence others to use the mark in association with wares that meet the defined standard. The licenced use is deemed to be use by the owner. A certification mark descriptive of the place of origin of the wares may be registered by an administrative authority for a country associated with the wares. The owner of the mark must permit use of the mark in association with any wares produced or performed in the area where the mark is descriptive. In this case, the certification mark HALLOUMI was intended to indicate the cheese with which it was used was of the following defined standard: produced only in Cypress using the historic method unique to that country, namely; traditionally, produced from sheep and/or goat’s milk or in the case of mixtures, cow’s milk is also allowed. The Opposition When the application was advertised, it was opposed by a number of parties, including the International Cheese Council of Canada (“Cheese Council”). Numerous grounds of opposition were asserted, including that:
The Hearing Officer said that no one could obtain a monopoly over a word on the basis that it was a certification mark if the word had been used extensively in Canada by others prior to relevant date such that it had become recognized in Canada as designating the kind, quality, value or place of origin of the wares. On reviewing the evidence, the Hearing Officer concluded that the Cheese Council had established the ground of opposition (a) since there had been bona fide commercial use of the mark or similar terms such that it was recognized in Canada as designating a kind of cheese. In addition, regarding ground of opposition (b), the Cheese Council had shown that at the date the statement of opposition was filed, a confusingly similar trade-mark had been sufficiently known to negate the distinctiveness of the applied-for mark. As a result, this ground of opposition was also established. The Appeal Cypress appealed from this decision to the Federal Court. On appeal it was argued that the Cheese Council had not met its initial evidentiary burden before the Trade-marks Opposition Board. However, Cypress did not file any additional evidence concerning the above grounds although it could have done so. The Judge noted that it was settled law that an opponent only had an initial evidentiary burden: at most it must submit sufficient evidence to support a prima facie finding in support of the grounds of opposition. Where an opponent satisfies this initial burden, it is up to the applicant to persuade the Hearing Officer that the grounds of opposition should not prevent the application from proceeding. In order to satisfy its burden, the Cheese Council had to demonstrate that the applied-for mark or any other mark so nearly resembling it as to be likely to be mistaken for it, had been used extensively in Canada by others prior to the relevant date to designate a type of cheese and that the mark had an accepted definition or meaning in the industry. The Cheese Council had established that it was possible to purchase cheese from various sources whose packaging bore the marks HALOOM, HALLOUM or HALOUMI in different cities in Quebec and in Ottawa. There was also evidence that a number of Canadian producers had sold substantial quantities of cheese designated as HALLOUM since 1995. A number of stakeholders in the industry testified that the term “halloumi” was used generically to designate a type of cheese. In light of this evidence, the Judge concluded that the Register’s decision was reasonable and the Cheese Council had discharged its initial burden. It was open to the Hearing Officer to find that the term “halloumi” could not be used exclusively by any one person or entity. As a result, the appeal was dismissed and the trade-mark application dismissed. Conclusion Different jurisdictions have come to different conclusions concerning protecting geographical designations. For example, in a similar case in Europe, it was found that producers located in Greece had the exclusive right to use the trade-mark FETA in association with cheese products, notwithstanding other European producers argued that the mark was generic. Discussions had been ongoing to attempt to arrive at an acceptable solution for the international protection of GIs. Unfortunately to date, no solution has been agreed to. How Not to Treat a Trade-MarkBy John McKeown A recent decision of the Federal Court illustrates the problems that can occur concerning trade-marks when the individuals involved do not understand how trade-marks work and the relevant legal requirements. The Facts Two individuals had been in the business of marketing valves in the oilfield industry for a number of years. In 2001, they agreed to join forces and to operate what was essentially a partnership through a corporation focusing on the sale of valves. The Supplier The individuals contacted a supplier in China (the “Supplier”) concerning the supply of valves. A letter of intent was signed which set out the basis of the relationship.
Shortly after signing the letter, it became apparent that the trade-mark FORTUNE was not acceptable since it was associated with quality problems in products originating from China. A consignment agreement was entered into relating to the Supplier’s products. This agreement contained a provision which stated that all products, designs, patents, inventions, calculations and other intellectual property which arose as a consequence of the agreement would be deemed to be equally owned by the parties. The FUSION Mark The individuals came up with the trade-mark FUSION as an alternative to the FORTUNE trade-mark. The individuals also entered into a further agreement with another manufacturer relating to the supply of ball valves in Canada. Subsequently this resulted in an exclusive representation agreement. The ball valves were sold in association with the trade-mark FUSION. There was no evidence that the Supplier exercised any control or had anything to do with respect to the ball valves. The individuals marketed FUSION valves in Canada, some of which were produced by the Supplier and some of which were produced by the second manufacturer. The Deterioration of the Relationship The relationship between the parties rapidly deteriorated. The individuals created a new corporate entity without advising the Supplier and transferred their business to that entity. The Supplier filed an application in Canada for the trade-mark FUSION without providing any notice to the individuals. Subsequently the individuals registered the trade-mark as a business name. Litigation ensued between the parties in the Province of Alberta. All outstanding issues were resolved save for ownership of the trade-mark FUSION. The Action The individuals brought an action in the Federal Court seeking to expunge the registration for the trade-mark FUSION owned by the Supplier and other relief. Expungement Section 18 of the Trade-marks Act lists the grounds under which the validity of a registration of a trade-mark may be attacked. A registration of a trade-mark is invalid if:
The Trial Judge stated that the FUSION mark fell squarely within the terms of the consignment agreement. That agreement said that intellectual property was equally owned by the parties and neither of them could now assert that somehow they owned the trade-mark. Entitlement The Supplier had alleged that it first used the trade-mark FUSION in September 12, 2002 when an order was placed by the corporation. Typically, in a dispute between a manufacturer and a distributor concerning entitlement to a trade-mark, the issue is whether the manufacturer or distributor, as the case may be, was the first to use the trade-mark in Canada. As a result, this date of first use is the criteria for determining entitlement. In order to show use, the Supplier was required to show that at the time of the transfer of the property or possession of the wares in the normal course of trade, the trade-mark was marked on the wares themselves or their packages. The Trial Judge referred to the provisions of the consignment agreement between the parties which provided that all products remained the sole property of the Supplier pending sale by the individuals or the corporation. In light of this provision, transfer of the products to the individuals or their corporation could not constitute use in Canada since the property in the goods was not transferred. Distinctiveness The Trial Judge referred to the fact that there was a complete mixing of products supplied by the Supplier and the other manufacturer and an absence of any control over the character or quality of products supplied by the manufacturer and sold in association with the FUSION trade-mark. As a result, it was found that the trade-mark FUSION had not acquired, or if it had acquired had lost, the element of distinctiveness. Misrepresentation The Trial Judge referred to previous cases which establish that a registration may be invalidated by two types of mistakes:
Since neither party disclosed the existence of the terms relating to ownership of intellectual property in the consignment agreement, the mark was expunged on the grounds of material omission. Conclusion The essence of a trade-mark is its distinctiveness. In order to be protected, a trade-mark must be distinctive of the wares of the trade-mark owner. This fundamental rule must influence how ownership of a mark is structured as well as how the mark is used in practice. What’s In A Name? A Rose by Any Other Name Would Smell as Sweet!By John McKeown A recent decision of the Court of Appeal for England and Wales has provided some interesting comments concerning the use of a competitor’s trade marks in comparative price lists. The Proceedings In the case, L’Oréal S.A. brought proceedings against the defendants who were selling replica perfumes. The defendants sold three ranges of products called STITCH, CRÉATION LAMAIS and DORALL. Each member of the range smells like a famous luxury branded perfume known under a well-known registered trade mark. L’Oréal alleged that the defendants’ use of comparison lists for each of the defendants’ ranges of product, showing which products correspond to which L’Oréal perfume, infringe its registered trade marks for those perfumes. The Factual Position The Court summarized the factual position as follows:
Consumers are not stupid. They will not see the cheap copy as being the same in quality as the original. They will see it for what it is and no more. The ECJ Some of the issues in the case had been referred by the Court to the European Court of Justice (“ECJ”) since they involved an interpretation of specific provisions of the Trade Marks Directive of the European Parliament. The ECJ found, for a number of reasons, that the use of the comparative advertisements was actionable. Once this judgment was received, it was up to the Court to implement the decision of the ECJ. While that decision was implemented, it appears to have been done very reluctantly. Jacob, L.J., a respected jurist, said his strong predilection, free from the opinion of the ECJ, would be to find that trade mark law did not prevent traders from making honest statements about their products where those products are themselves lawful. The Issue Jacob, L.J. said the issue was whether trade mark law prevented the defendants from telling the truth. Even though their perfumes are lawful and do smell like the corresponding famous brands, does trade mark law nonetheless muzzle the defendants so that they cannot say so? Free Speech He had a number of negative comments concerning the judgment of the ECJ. First and most generally, he said he was in favour of free speech. There is no good reason to dilute free speech in cases where the speaker’s motive for telling the truth is his own commercial gain. Truth in the marketplace matters even if it does not attract quite the strong emotions as the right of a journalist or a politician to speak the truth. The ECJ’s decision means that poor consumers are the losers. Only the poor would dream of buying the defendants’ products. The real thing is beyond their wildest dreams yet they are denied the right to receive information which would give them a little bit of pleasure; the ability to buy a product for a Euro or so which they know smells like a famous perfume. Also there was no harm to the trade mark owner. Freedom to Trade The second reason related to freedom to trade. If a trader cannot say “my goods are the same as Brand X (a famous registered trade mark) but half the price”, there was a real danger that important areas of trade will not be open to proper competition. Competition The final reason was that as a result of the ECJ decision, the EU will have a more “protective” approach to trade mark law than other major trading areas or blocks. Many countries, such as the US, have a healthy attitude to competition law and would not keep a perfectly lawful product off the market by the use of trade mark law to suppress truthful advertising. A brief review of US law shows that the Court’s observation was correct. It seems that one may lawfully use the trade mark of another in comparative advertising so long as there is truthful disclosure and no likelihood of confusion. The Canadian Position Unlike the provision of the Trademarks Directive and the corresponding legislation in England, the Canadian Trade-marks Act (the “Act”) does not provide any exceptions for comparative advertisements of the type in issue in this case. First, under the Act, the registration of the trade-mark in respect of wares, gives to its owner the exclusive right to the use throughout Canada of the trade-mark in respect of those wares. Presumably, this section would be applied and a finding of infringement would be made. Second, section 22 of the Act is frequently applied in cases of this nature. This section provides that no person shall use a trade-mark registered by any person in a matter likely to have the effect of depreciating the value of the goodwill attaching thereto. Goodwill for these purposes consists of reputation and connection built up by years of work or gained through significant expenditure of money and which is identified with the goods distributed by the owner in association with the trade-marks. The goodwill attached to a registered trade-mark may be depreciated if any of the following occur:
The application of this section is limited to use which any person may make in association with goods within the meaning of the Act of another’s registered trade-mark, in such a manner as to depreciate the value of the goodwill attaching thereto. The difference between the requirements to show use for wares and services has led to somewhat surprising results. In one case, it was found that the reproduction of the plaintiff’s trade-marks on the defendant’s packages was use within the meaning of section 22 and actionable. However, the reproduction on the defendant’s brochures was not. Conclusion While there are significant differences between the wording of the legislation in England and the EU and the Canadian Act, the criticisms made by Jacob, L.J. are not dependent on statutory wording but are of broad application. Privacy Slow Cooker – Were PIPEDA Amendments Worth the Wait?By Bernice Karn (This article will be published in Canadian Privacy Law Review (Oct 2010), Vol 7, Number 11.) As part of a recent flurry of Parliamentary activity, in May of this year, the federal government tabled Bill C-29 in the House of Commons to propose long-anticipated amendments to Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA“). Since PIPEDA's enactment in 2001, practitioners have often struggled to interpret the language PIPEDA, which is quite terse and cryptic in some areas, yet rather verbose and very “non-legal” in others. By its own terms, PIPEDA requires that Parliament conduct a review of the Act every five years, and these proposed amendments represent the outcome of the first review of the Act that took place in 2006. Business Transactions One of the major criticisms of PIPEDA has been that the Act did not make any exception for the requirement to obtain consent to the collection, use or disclosure of personal information in the context of a sale of a business or other business transaction. For M&A transactions, this oversight has caused major headaches for vendors’ and purchasers’ counsel alike. If enacted, Bill C-29 would add a new Section 7.11 to PIPEDA that permits parties to a business transaction to use and disclose personal information as necessary for due diligence purposes and for the purpose of closing the transaction without consent of the individuals concerned, provided that the parties agree: to use and disclose the information only for purposes related to the transaction; to protect the information by security safeguards appropriate to its sensitivity; and, if the transaction does not close, to return or destroy it within a reasonable time. The proposed PIPEDA amendments would obligate the parties to notify the data subjects following closing of the transaction and of the disclosure of their personal information. Business Contact Information One of the oddities in PIPEDA is that the definition of “personal information” excludes certain business contact information, but that list of exclusions surprisingly does not include a person’s business email address. Thus, in at least one complaint to the federal Privacy Commissioner, the use of a person’s email business email address without his consent was found to be contrary to the requirements of PIPEDA.1 The PIPEDA amendments address this anomaly and now create a new “business contact information” definition that includes a person’s business email address. This new definition is coupled with a new section 4.01, which states that Part 1 of PIPEDA does not apply to business contact information if this information is collected, used or disclosed “solely for the purpose of communicating or facilitating communication with the individual in relation to their employment, business or profession.” Data Breach Notification Following the lead of many US states, the proposed amendments to PIPEDA would allow for a data breach notification protocol. As is the case in many other areas of PIPEDA, where organizations are essentially required to use their best judgement about the actions necessary for compliance, the decision about whether or not to make a notification really depends on the organization’s assessment of the seriousness of the breach. Organizations are required by the amendments to report to the federal Privacy Commissioner any “material” breaches of security safeguards in relation to personal information under their control. Materiality is to be judged in relation to the sensitivity of the information at risk, the number of persons whose information has been affected and whether or not the breach was an isolated incident or part of a systemic problem. The amendments further impose an obligation to notify the affected individuals in situations in which a breach of security standards involving personal information would pose a threat of “significant harm” to the individuals. “Significant harm” includes situations of bodily harm, humiliation, damage to reputation or relationships, loss of employment, business or professional opportunities, financial loss, identity theft, negative effect on a person’s credit record and damage to or loss of property. However, organizations hoping for concrete direction from PIPEDA on when to notify individuals in cases of data breach will be disappointed. Organizations are directed to consider various factors (such as the sensitivity of the personal information involved and the probability of misuse of the information) in making their own determination about whether to notify affected individuals. The amendments also go further in imposing a positive obligation on organizations to notify other organizations or government institutions that may be able to reduce the risk of harm emanating from the breach, if certain conditions, to be set forth in regulations, are satisfied. Other Amendments of Interest While the business transaction, business contact information and data breach notification amendments likely pose the most interesting changes for businesses, a few other amendments bear examination as well. For example: • Knowledge and Consent - Parliament now is raising the bar on the type of consent (to collection/use/disclosure of personal information) that will suffice. In the present version of PIPEDA, consent is referred to in conjunction with “knowledge.” In other words, when collecting consent, an organization is under a duty to ensure that the individual granting consent understands what he/she is agreeing to. Under the new amendments, this knowledge concept is strengthened. If the amendments are passed, a person’s consent will only be valid if it is reasonable to expect that the individual understands the nature, purpose and consequences of the collection, use or disclosure of personal information to which they are consenting. This is more than mere knowledge and imposes a higher duty on organizations to ensure that individuals truly understand the purposes for which their personal information is being collected, used and disclosed. • Employee Information – Although PIPEDA only applies to employees’ personal information if the employer is a “federal, work, undertaking or business”, over the years the issue of whether an employee’s work product is considered to be his/her personal information has attracted a bit of controversy. Bill C-29 attempts to settle the matter through amendments to Section 7 of PIPEDA that would make it clear that the employer (or any organization) does not require the employee’s consent to the collection, use or disclosure of this information if it is produced in the course of their employment and the collection/use/disclosure is “consistent with the purposes for which the information was produced.” Unfortunately, these amendments merely do away with consent and seem to be premised on the assumption that information produced by an individual in the course of their employment, business or profession is personal information about an individual, which is debatable. In at least one set of findings from the federal Privacy Commissioner’s Office, “work product” information was found not to be personal information2 while subsequent sets of findings took a contrary view.3 • Lawful Authority – Canadian businesses have sometimes been presented with letters from policing authorities requesting personal information to aid the authorities in their investigations. While most businesses are more than willing to assist police in carrying out their duties, some organizations have been concerned about their liability for contravening PIPEDA for disclosing personal information without consent. The existing provisions of Section 7(3)(c.1) of PIPEDA permit disclosure without consent if the disclosure is made to a “government institution” that has made a request for the information, the government institution has identified its “lawful authority” to obtain the information and has indicated the reasons for the request (which are law-enforcement related). “Government institution” has never been defined (although the current version of PIPEDA says that it may be defined by regulation). However, the bigger question has revolved around what is “lawful authority?” Some observers believe that “lawful authority” means a warrant, subpoena or other judicially authorized process, while others believe that it simply means that the government institution is acting within its statutory mandate. The proposed amendments to PIPEDA only answer part of the question. While they say that “lawful authority” means something other than a subpoena, warrant, etc., unfortunately, the amendments do not actually say what that “something other” is, which is not helpful to businesses trying their best to comply. The amendments go further and state that the organizations that are presented with a government institution demand for disclosure of personal information are not required to verify the validity of that lawful authority. While presumably Parliament is trying to be helpful by not requiring businesses to seek advice in determining whether “lawful authority” exists or not when faced with a demand for personal information, it seems to be a roundabout way of saying that the non-disclosure without consent rule just doesn’t apply in law enforcement situations. One wonders why Parliament could not simply state such a simple rule in the legislation. • Witness Statements – Another curious amendment to the consent rules is that information contained within a witness statement may be collected, used and disclosed if necessary to “assess, process or settle an insurance claim.” No doubt those amendments will be welcomed by the insurance industry. However, if this type of exception is useful for insurance litigation, it seems strange that a broader amendment was not proposed for litigation generally, especially since groups such as the Canadian Bar Association made submissions to the Standing Committee on Access to Information Privacy and Ethics (during the mandatory PIPEDA review) that PIPEDA should not affect existing litigation processes.4 PIPEDA continues to be a work in progress and we will continue to keep readers updated as these proposed amendments make their way through the legislative process. [1] PIPEDA Case Summary #297 (1December 2004): Available http://www.priv.gc.ca/cf-dc/2005/297_050331_01_e.cfm. [2] PIPEDA Case Summary #14 (21 September 2001): Available http://www.priv.gc.ca/cf-dc/2001/cf-dc_010921_e.cfm; PIPEDA Case Summary #15, (2 October 2001): Available http://www.priv.gc.ca/media/an/wn_011002_e.cfm. [3] PIPEDA Case Summary #220(15 September 2003): Available: http://www.priv.gc.ca/cf-dc/2003/cf-dc_030915_e.cfm; PIPEDA Case Summary #303 (31 May 2005): Available: http://www.priv.gc.ca/cf-dc/2005/303_20050531_e.cfm. [4] Canada. Parliament. House of Commons. Standing Committee on Access to Information, Privacy and Ethics. Statutory Review of the Personal Information Protection and Electronic Documents Act (PIPEDA): Fourth Report. Ottawa: Communication Canada – Publishing, May 2007 at 20: Available: http://www2.parl.gc.ca/HousePublications/Publication.aspx?DocId=2891060&Language=E&Mode=1&Parl=39&Ses=1. Canada’s Anti-SPAM Legislation – New Name, Old ContentBy Bernice Karn In March of this year, we reported on Bill C-27, the Electronic Commerce Protection Act, (the “ECPA”) which would have finally created a Canadian anti-SPAM legislative framework, through amendments to the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Telecommunications Act and the Personal Information Protection and Electronic Documents Act (“PIPEDA”). Click here to read our previous report. The ECPA died on the order paper with the proroguing of Parliament on December 29, 2009. Undaunted, the federal government has re-introduced the ECPA under a new name, the Fighting Internet and Wireless Spam Act (“FISA”). FISA contains a number of drafting revisions, but few substantive changes to the ECPA. Readers should note the following:
As these amendments progress through Parliament, we will continue to monitor their evolution and keep readers advised on important developments. Are Online Music Previews "Research?" - The Federal Court of Appeal Says "Yes."In a recent decision, SOCAN v. Bell Canada et al., the Federal Court of Appeal affirmed the decision of the Copyright Board of Canada in which it was held that 30-second previews offered by online music services like iTunes and Puretracks do not require the payment of royalties for the use of copyright in the underlying musical works. Instead, the previews are exempted from liability under the “fair dealing” exception in the Copyright Act – in this case, fair dealing for the purpose of “research.” Fair Dealing under the Copyright Act Under the Copyright Act, an act that would otherwise infringe copyright if done without the consent of the copyright owner is not an infringement if it is a “fair dealing” done for one of a limited list of allowable purposes: research, private study, criticism, review or news reporting. In order to qualify for the exception, the dealing must both fall into one of those defined categories and be qualitatively “fair.” Since “fair” is not defined in the Act, that determination must be made in light of the case law, which was rather sparse until the seminal case of CCH Canadian v. Law Society of Upper Canada, a 2004 decision in which the Supreme Court of Canada considered the nature and scope of the fair dealing exception for the first time. In CCH, the Court identified six specific factors – the purpose of the dealing, the character of the dealing, the amount of the work used, alternatives to the dealing, the nature of the original work and the effect of the dealing on the market for that work – that courts may consider when determining whether or not a particular dealing is “fair.” Fair Dealing and SOCAN Tariff 22.A The SOCAN v. Bell decision had its origin in SOCAN Tariff 22.A, a long-fought tariff proceeding in which SOCAN, which owns the right to communicate musical works to the public by telecommunication in Canada and, in turn, pays royalties to rightsholders, asked the Copyright Board to determine the royalties payable for various types of Internet transmissions of music. In the case of online music services that offer permanent downloads, SOCAN proposed two different tariff rates: a lower rate for services that do not offer previews and a higher rate for services that do. Although the objectors to Tariff 22 opposed the request for the higher rate, they did so on the basis that previews have no separate economic value. Nobody raised the fair dealing issue before the Board. Under the circumstances, its decision, rendered in October 2007, came as a surprise. However, the Board indicated that, in light of CCH, it felt compelled to deal with the issue of its own motion. In its view, the direction in CCH Canadian to give a “large and liberal interpretation” to the concept of “research” meant that users who listen to previews, with a view to sampling what is available online and verifying whether or not they want to buy a particular track, were in fact engaged in research within the meaning of the Act. Judicial Review: SOCAN v. Bell Particularly in light of the manner in which the fair dealing issue was introduced, it was no surprise that SOCAN sought judicial review of this aspect of the Board’s decision. It challenged the Board’s finding on two grounds: first, that listening to previews is not “research” within any reasonable definition of that word (a conclusion previously reached by a US federal court in a case involving ASCAP, SOCAN’s sister organization in the US) and, second, that the manner in which online services offer previews is not, in any event, “fair.” Among other things, SOCAN alleged that services do not take any of the necessary precautions to ensure that their customers use previews for purposes that are truly research-based and fair, as opposed to simply for entertainment and as an alternative to actually buying the music. The Federal Court of Appeal dismissed both of SOCAN’s arguments. Whereas SOCAN contended that true “research” includes only activities that involve investigation, systematic research, critical analysis, scientific inquiry or factual discovery, generally carried out in a formal setting, the Court agreed with the Board that such a restrictive interpretation was inconsistent with a “large and liberal interpretation” of the term. Since Parliament chose not to add restrictive qualifiers to the word as it appears in the Act, it was not unreasonable for the Board to determine that the consumer’s efforts to seek and find a particular musical work is also “research” in a broad sense – even though, from the standpoint of the service itself, the primary purpose of offering previews could well be the pursuit of increased sales and profits. (Of course, the Supreme Court in CCH also stated specifically that research carried out for commercial purposes could nonetheless qualify under the exception.) As for the fairness of the actual dealings, the Court dismissed SOCAN’s application in rather summary terms; in fact, with the exception of one of the six factors, it simply accepted the Board’s analysis without additional comment. The one factor that the Court did consider specifically was the third, the amount of the dealing. SOCAN had urged the Court to consider not just each individual preview but, instead, the aggregate number of users and previews and the resulting hours of uncompensated use of music. The Board preferred not to consider SOCAN’s approach – but not because it was without merit. Rather, the Board cited a lack of evidence to support SOCAN’s argument, which was largely because the issue was not raised or argued before the Board. Consequently, the Court decided that, “without an enlightened debate on those questions, and given the fragmentary nature of the available information, it would be wiser to leave this issue for another day.” Implications of the Decision The decision in SOCAN v. Bell shines a spotlight on the Board’s decision to consider the fair dealing issue without the benefit of evidence or argument from the parties. Indeed, the Court expressed its surprise that the Board would have come to a decision on such an important issue without discussion with the parties. The Court agreed that, “in light of the socio-economic interests at stake,” the parties should have been heard on the issue. However, the Court elected to determine the issue, as the parties had requested, rather than remitting it to the Board for further consideration. As a result, the Board has indicated that, when considering the future recertification of Tariff 22.A, it will expect the parties to address fair dealing specifically if SOCAN wishes to pursue the previews issue. (Meanwhile, SOCAN has sought leave to appeal the Federal Court of Appeal’s decision to the Supreme Court of Canada.) Perhaps more importantly, SOCAN v. Bell was decided just a few weeks before the federal government introduced Bill C-32, the Copyright Modernization Act, in which it proposed to expand the fair dealing exception to include three new categories of allowable purpose: parody, satire and education. Now that the “large and liberal interpretation” requirement has been interpreted both by the Copyright Board and by the courts, it is easy to imagine future controversy over the treatment of these new categories – particularly education, which is capable of a number of very broad interpretations and is already the subject of other specific exceptions in the Act. We will be looking at this issue more closely in a future edition of the Cassels Brock Report. Open Source Software: What it Means for Your BusinessOpen source software (OSS) is playing an increasing role in software development as organizations seek cost effective solutions to operate their business. OSS can offer significant advantages over proprietary software but one must understand how to use OSS to maximize its benefits and reduce the risks that are typically associated with it. But, since OSS is typically the object of a multitude of contributions from developers around the world, it can also expose users to IP claims as a result of proprietary components introduced, knowingly or unknowingly, into the OSS. Conversely, because of the onerous licensing scheme that sometime underlies OSS projects, organizations must be extremely careful not to taint their own proprietary assets by integrating them to an OSS project in such a manner as to wipe out their value entirely.
To learn more about OSS, click here to read the complete article. Recent Developments on the Scope of Patentable Subject MatterWhether or not non-tangible businesses processes, such as digital and internet business processes, are patentable is an issue that has vexed inventors and their advisors for a number of years. Generally, a pure process, much like an apparatus or method of manufacture, is considered a legitimate patentable subject matter - i.e. matters which, if novel, unobvious and possessing utility, may entitle an inventor to a territorial monopoly for their invention. But, in our fast-changing digital economy, there has been an explosion of new forms of pure processes not contemplated when patent legislation was initially drafted, especially in the financial, marketing and commercial sectors. Inventors today are looking to protect entirely new categories of processes and methods of conducting business which highlight the need to distinguish between patentable subject matter and pure abstract, unpatentable ideas. On June 28th, 2010, the Supreme Court of the United States rendered its much anticipated decision in Bilski et al v. Kappos, which dealt with this very issue. The case, which involved an inventor who claimed protection for (i.e. a monopoly over) a process by which commodities buyers and sellers in the energy market could protect, or hedge, against price changes, garnered a great deal of domestic US and international attention as it wound its way through the US Courts. In the end, the Supreme Court concluded that the Bilski invention was not the proper subject matter for a patent. Nevertheless, the majority declined to rule that all software or business method claims are inherently unpatentable, and went further by rejecting the lower Court’s attempt to enunciate a single bright line test as the sole determinate. In so doing, the US Supreme Court has left the door ajar for innovative Digital Age inventors. In the lower Court ruling in the Bilski case, the US Federal Circuit Court had confirmed both the earlier examination and US Board of Patent Appeals and Interferences rejection of the Bilski patent claims. The US Federal Circuit Court had prescribed a single two-pronged “objective” test for determining whether a business method or claimed process constitutes eligible patentable subject matter. The so-called “machine or transformation test” required the process or business method either to: (a) be tied to a particular machine or apparatus; or (b) transform a particular article into a different state or thing. While the US Supreme Court acknowledged that the machine or transformation test may be a useful and an important tool for consideration, it did not constitute the sole test for patent eligibility under the U.S. Patent Act. The US Supreme Court decision in Bilski should be noted with interest by those in Canada and elsewhere who look to capitalize on the opportunities presented by the Digital Age economy; not the least of which is the ability to conduct business without regard to geographic borders and thus be in a position to compete with domestic US concerns in their home market without the necessity of having to be situated in the United States. It will also be interesting to monitor domestic Canadian reaction to the US Supreme Court decision in Bilski. In March 2009, the Canadian Patent Appeal Board rejected Amazon.com’s Canadian patent application for its one click on-line shopping process. In the Amazon.com case, the Canadian Patent Appeal Board commented negatively on the patentability of business methods in Canada and in doing so citied foreign case law, including the lower Court decision in Bilski, to support the proposition that, in Canada, in order to qualify as patentable subject matter, a patent claim must, in its substance, involve a physical object or comprise an act or series of acts performed by some physical agent upon some physical object to produce in that object some change of either character or condition. Canadian Patent Appeal Board decisions are binding only upon the participants to the appeal. However, in 2009 and following a public consultation process, the Canadian Patent Office amended Chapter 12 (Subject Matter and Utility) and Chapter 13 (Examination of Applications) of the Canadian Manual of Patent Office Practice (the “MOPOP”), and just a few weeks prior to the US Supreme Court decision in the Bilski case, circulated for public review and comment draft revisions to Chapter 16 of the MOPOP (Computer Implemented Inventions). While not legislation, the MOPOP serves as a guide for patent examiners, applicants and patent agents in the operational procedures and examination practices applied and followed by the Canadian Patent Office. These recent and proposed MOPOP revisions appear to reflect the Canadian Patent Appeal Board views expressed in the Amazon.com case. One would hope that the US Supreme Court’s decision in the Bilski case, and stakeholder comments about the case, will find their way into the MOPOP public consultation process, as well as subsequent Canadian Patent Appeal Board cases and jurisprudence (including the Canadian Federal Court appeal in the Amazon.com case). However, until that occurs, it appears that Canada and the United States of America, two significant Digital Age trading partners, have adopted different approaches to assessing the scope and breadth of patentable process subject matter. We will continue to monitor this area and follow up in subsequent articles as developments unfold. |