Newsletter > August 2018View/Download this newsletter in PDF
In this issue: 1. News & Upcoming Events 2. Transport Canada New Guidelines on Automated Vehicle Testing 3. Quebec Aviation Decisions – décisions transport aérien du Québec 4. Common Interest Privilege in Commercial Transactions 5. Doing Business in Canada – Intellectual Property 6. Termination Provisions in Employment Contracts 7. Duty of Care of Food Producers 8. Rail Carriage – Provision of Railcars
1. News & Upcoming Events
- Rui Fernandes, Gordon Hearn, Kim Stoll and Louis Amato-Gauci have been selected by their peers for inclusion in The Best Lawyers in Canada 2019.
- Rui Fernandes has been selected for inclusion in Who’s Who Legal: Thought Leaders – Global Elite 2019.
- Rui Fernandes, Gordon Hearn and Kim Stoll have been selected for inclusion in Who’s Who Legal: Canada 2018.
- Houston Marine Insurance Seminar, September 16-18, 2018, Houston.
- Ontario Trucking Association Annual Fall Golf Classic, September 18th, 2018, Glen Abbey Golf Club, Oakville.
- Rui Fernandes will be presenting on “Recent Developments in Canadian Law” to London underwriters on September 18th, 2018 in London, England.
- Carole McAfee Wallace will be speaking on “Are Incorporated Drivers at Risk of Being Classified as Employees?” at the 32nd Annual Conference on Transportation Innovation and Cost Savings on September 25th, 2018 in Hamilton.
- Marine & Insurance Claims Association Annual Dinner, October 5th, 2018, New York.
- McGill University / PEOPIL International Aviation Law: Liability, Insurance & Finance Conference, October 19-20, 2018, Ireland.
2. Transport Canada New Guidelines on Automated Vehicle Testing (*1)In June of 2018, Transport Canada released a report on automated vehicle testing, Testing Highly Automated Vehicles in Canada: Guidelines for Trial Organizations. Canada is following a number of countries who have introduced similar legislation. For example, in Australia, AustRoads and the National Transport Commission have jointly developed new “Guidelines for Trials of Automated Vehicles in Australia”, published on 24 May 2017. In China on 11 April 2018, the Ministry of Industry and Information Technology (MIIT), the Ministry of Public Security (MPS) and Ministry of Transport (MOT) jointly issued the Administrative Rules on Intelligent and Connected Vehicle Road Testing. In introducing the guidelines in Canada, Minister of Transport Marc Garneau stated:
“These guidelines will help to ensure that trials are conducted in a safe and secure manner, according to a set of consistent, national minimum requirements. This document also clarifies the roles and responsibilities of each level of government in facilitating these tests, and will serve to promote Canada as a leading destination for research and development of automated vehicles.”Highlights of the Report Transport Canada recognizes that multiple levels of government must work together to facilitate safe testing and eventual development of automation technologies on Canadian roads. Transport Canada, under the Motor Vehicle Safety Act (MVSA), establishes safety regulations for the manufacture and importation of motor vehicles, as well as designated motor vehicle equipment, and the shipment of newly manufactured vehicles and equipment across provincial/territorial boundaries. The objective of these regulations is to reduce the risk of death, injury, and damage to property and the environment. Provinces and territories are responsible for the licensing of drivers, vehicle registration and insurance, as well as laws and regulations regarding the safe operation of vehicles on public roads. As such, provinces and territories are also responsible for approving and overseeing trials of automated vehicles that take place within their jurisdiction. Falling under the jurisdiction of provinces and territories, municipal governments, to varying degrees, are in turn responsible for: the enactment and enforcement of by-laws concerning vehicle movement; the use of local infrastructure; and, the provision of public transportation in their respective jurisdictions. The Report sets out pre-testing, testing, and post-testing guidelines. The pre-testing guidelines relate to regulatory compliance and safety requirements. The testing and post-testing guidelines relate to driver training, incident reporting, and information sharing on best practices, trial outcomes, and emerging technologies to government authorities. Highlights of these new guidelines are set out below. Pre-Testing Guidelines: Regulatory Compliance and Safety Requirements Trial Organizations must ensure that Highly Automated Vehicles (HAV) conform to Transport Canada’s Motor Vehicle Safety Act (MVSA) including requirements pertaining to imported vehicles and the shipment of vehicles across provincial/territorial boundaries. If a trial organization conducting tests of an automated driving system also intends to incorporate the use of wireless technologies (e.g. Dedicated Short Range Communications (DSRC)—to test connectivity capabilities with other vehicles and infrastructure), the trial organization must ensure that the trial complies with all certification and licensing requirements, including procedures administered by Innovation, Science and Economic Development Canada Prior to conducting trials, a trial organization must ensure that it has obtained the appropriate authorizations from the province or territory where the tests will be conducted, as applicable, including any required permits/approvals/authorizations, or other requirements that may be specified by the jurisdiction as part of their trial approval processes. These authorizations may include consultations with, and/or approvals from, the municipalities involved. Trial organizations should ensure that all trial vehicles have undergone sufficient testing (as determined by the trial organization) in a closed course (e.g. closed roads, parking lots, or test tracks), on-road in another jurisdiction, and/ or through other validation mechanisms (i.e. computer simulations) prior to commencing a trial on public roads with other road users. Trial organizations may be directed by the provincial/ territorial road transport agency to label trial vehicles and/or develop a communications plan to inform the public and other road users of trials on public roads. Alternatively, provincial and territorial road transport agencies may choose to develop their own communication plans to notify the public of trials on public roads. All trial vehicles should have a data recording device that records technical information about the status and operation of the Automated Driving System (ADS). The trial organization should ensure that the trial vehicle meets the following requirements:
a) The ADS can transition safely between automated and non-automated modes. b) The ADS has a warning system that alerts the driver of an incoming transition between automated and non-automated modes. These alerts should convey critical information clearly to the driver in the manner the trial organization sees fit. c) The ADS should also have a request to intervene function alerting the driver to perform the DDT fallback, with sufficient warning time. The function should allow the driver to disengage the automation function and allow the driver to assume manual operation of the vehicle, or bring it to a minimal risk condition. d) The automated vehicle should have a mechanism to alert the driver of an ADS failure.When seeking approval from a provincial/territorial road transport agency to conduct a trial, trial organizations may be asked to declare that they have given due consideration, and where necessary, incorporated appropriate measures, protocols, and equipment redundancies, to address various safety issues Testing Guidelines: Driver Training and Incident Reporting Trial organizations are responsible for the safe operation of trial vehicles at all times, regardless of whether the ADS is engaged. Therefore, trial organizations should ensure that trial drivers, including remote drivers, have appropriate training to safely execute their responsibilities prior to conducting trials. Trial organizations should provide reports on unplanned disengagements of the ADS as required by the provincial or territorial road transport agency that provided the permit. The road transport agency is encouraged to share the reports with Transport Canada officials to inform the development of future safety policies. Post-Testing Guidelines: Sharing of Best Practices and Policy Development Trial organizations are encouraged to share best practices and lessons observed with respect to the conduct of trials and to provide feedback to relevant federal, provincial and territorial authorities regarding the regulatory requirements and permit procedures they have been required to follow. Provincial and territorial road transport agencies may also encourage trial organizations to provide an end-of-trial report to officials on research and trial outcomes, to help inform future policies and programming related to ADS testing and deployment. Provincial and territorial road transport agencies are encouraged in turn to share these reports with Transport Canada officials. While these reports would not necessarily require trial organizations to share commercially sensitive and/or proprietary information, appropriate measures to protect trial organization data will be implemented where necessary. These measures would be informed by existing procedures that Transport Canada has established with manufacturers to facilitate defect and collision investigations, as well as other research activities. Rui M. Fernandes Follow Rui M. Fernandes on Twitter @RuiMFernandes and on Linkedin. See also his blog at http://transportlaw.blogspot.ca Endnotes (*1) TP 15390-E TC 1006019 E – Transport Canada Publication
3. Deux importantes décisions interlocutoires de la Cour Supérieure du Québec en matière de transport aérien international dans le cadre des actions collectivesLa Cour supérieure du Québec a examiné une question importante afférente au conflit de lois, ainsi qu’à la distribution des pouvoirs selon la constitution canadienne, dans le cadre d’une action collective intentée au Québec, relative à l’écrasement du vol AH5017, au Mali le 25 juillet 2014. Suite à une première décision interlocutoire importante, concernant les victimes pouvant faire partie des réclamants faisant valoir ses droits devant les tribunaux canadiens, en vertu de la Convention de Montréal (*1), la Cour supérieure s’est récemment penchée sur la loi applicable à la détermination des membres de la famille des victimes, pouvant intenter une action au Canada (*2). La partie demanderesse a invoqué l’article 3083 du Code Civil du Québec, qui prévoit que la capacité juridique d’une partie est déterminée en fonction de la loi de son lieu de résidence (3). La partie demanderesse a donc soutenu que les demandeurs pouvaient comprendre des résidents burkinabés, ayant le droit de demander des dommages-intérêts, en tant que victime par ricochet, selon la loi burkinabé. La compagnie aérienne a, quant à elle, invoqué l’article 1 de l’Annexe II de la Loi sur le transport aérien (*4) qui définit les membres de la famille éligibles à un dédommagement en cas de décès d’un passager, de façon plus restrictive que la disposition équivalente en droit burkinabé. La Cour supérieure a donc dû choisir entre l’application de la loi fédérale canadienne, et la loi étrangère désignée par la règle de conflit de lois en droit québécois. Le juge Poirier a décidé en faveur de la compagnie aérienne défenderesse. Il a souligné, que la compétence en matière aéronautique n’a jamais été dévolué aux provinces par le Canada, et reste un pouvoir fédéral dit exclusif, par la Cour Suprême du Canada (*5). Vu la précision de l’article 1 de l’Annexe II qui énumère et définit toute personne pouvant intenter une action suite au décès d’un passager (*6), le juge a opiné que l’intention sans équivoque du législateur fédéral, était de limiter les réclamants, à l’exclusion de toute référence aux lois provinciales. La requête de la demanderesse dans Dumont Lussier c. Koninklijke Luchtvaart Maatschappij (KLM) (*7), également présentée en tant qu’action collective, contre le transporteur néerlandais, porte sur le manquement de la compagnie aérienne à indemniser les passagers, pour le retard résultant de l’annulation d’un vol sur la ligne Amsterdam-Toronto. La Cour supérieure, sans opposition de la partie défenderesse, a permis la modification de la requête introductive d’instance, afin d’invoquer le Règlement (Ce) No 261/2004 (*8) du Parlement Européen, comme fondement juridique à l’appui de sa demande. Ce Règlement impose aux transporteurs communautaires, un régime d’indemnisation forfaitaire en cas de retard, annulation ou refus d’embarquement. Le même régime s’applique aux autres transporteurs, pour leurs départs à partir des aéroports communautaires. Plus polémique était la deuxième modification proposée par la demanderesse, et visant l’élargissement de son action, initialement prévue pour les passagers affectés pour son vol spécifique qui était annulé. La demanderesse proposait comme modification, de réclamer les indemnités prétendument impayées, pour tous les passagers ayant voyagé à bord de l’une des huit compagnies aériennes les plus importantes desservant le marché canadien transatlantique, au cours des trois dernières années, et qui avaient subi un désagrément couvert par le règlement et donnant droit à indemnité. Le juge Kalichman de la Cour Supérieure, a refusé cette modification, étant donné l’impact majeur que ce changement provoquerait sur le déroulement de l’instance. La demanderesse n’avait pas été en mesure d’estimer le nombre de vols potentiellement couverts par l’élargissement de cette action. La Cour aurait eu à considérer les défenses avancées par les compagnies aériennes, pour un nombre de vols indéterminé. Ceci aurait retardé sévèrement le déroulement de l’instance, au préjudice des réclamants couverts par l’action, telle que constituée initialement par la demanderesse. The Quebec Superior Court has recently rendered two important decisions with respect to private international air law and its application in the context of the plethora of class actions being prosecuted against airlines in Canada, and particularly in Quebec. In Zougrana v. Air Algérie, a second important interlocutory decision in the class suit relating to an air crash in Mali in 2014 was rendered holding that family members eligible to sue in Canada in respect of the death of a passenger were to be determined pursuant to s.1 of Annexe II of the Carriage by Air Act, and not pursuant to the more generous terms provided under the laws of Burkina Faso, where certain claimants resided, and which was argued by the plaintiff to be applicable pursuant to rules of conflicts of laws in force in Quebec. In Dumont Lussier v. Koninklijke Luchtvaart Maatschappij (KLM), the plaintiff was prosecuting a class action against the Dutch airline for failure to indemnify passengers affected by a flight cancellation. The court declined to allow an amendment to the claim to shift from claiming on behalf of all passengers on one cancelled flight to include all passengers on delayed or cancelled flights operated in the previous three years by eight major airlines. The court found that the scope of the amendment was overly broad and that it would hamper prosecution of the claim for the court to grapple with all of the defences applicable to an undefined number of flight delays and cancellations. Mark Glynn (*1) La decision Zoungrana c. Air Algérie 2016 QCCS 2311 était commentée dans notre édition de juillet 2016. (*2) Zoungrana c. Air Algérie 2018 QCCS 2571 (*3) Code civil du Québec, RLRQ c CCQ-1991 (*4) Loi sur le transport aérien, LRC 1985, c C-26 (*5) Johannesson c. West St-Paul (Rural Mun. of), C.S. Can.,  1 R.C.S. 292 (*6) La définition, selon la loi canadienne, de membre de la famille s’entend : de l’époux de la personne qui, à la mort du voyageur, vivait avec lui dans une relation conjugale depuis au moins un an ; du père ; de la mère ; du beau-père ; de la belle-mère ; du grand-père ; de la grand-mère ; du frère ; de la sœur ; de l’enfant — adoptif ou non — ; du beau-fils ; de la belle-fille ; du petit-fils ou de la petite-fille ; et de toute autre personne à qui le voyageur tenait lieu de père ou de mère. (*7) Dumont-Lussier c. Koninklijke Luchtvaart Maatschappij (KLM), 2018 QCCS 2989 (*8) Règlement (CE) n° 261/2004 du Parlement européen et du Conseil du 11 février 2004 établissant des règles communes en matière d’indemnisation et d’assistance des passagers en cas de refus d’embarquement et d’annulation ou de retard important d’un vol, et abrogeant le règlement (CEE) n° 295/91
4. Dealing with Deal Privilege: The Availability of Common Interest Privilege in Commercial TransactionsInformation and communications protected under solicitor-client privilege are confidential as between a client and their lawyer. This means that what might otherwise amount to relevant evidence – that is, admissible in court, or required to be disclosed to the opposing party in a lawsuit—can be kept confidential so long as three conditions are met: i) the communication must be between the lawyer and the client; ii) for the purpose of seeking or giving legal advice; and iii) intended to be kept confidential by the parties. The disclosure of otherwise privileged communications or information to a third party normally constitutes a waiver of privilege. This is because such actions are deemed incompatible with the intention for the communication to be held in confidence. For example, a conversation with your lawyer and a group of your friends at a crowded bar would likely not be considered privileged, as an implied intention to forfeit privilege can be inferred from such a scenario. There are some exceptions to the general rule that disclosure to a third party amounts to a forfeiture of privilege. Common interest litigation privilege, for example, extends to parties who have a commonality in interest with respect to anticipated litigation such that the sharing of information is consistent with the continued intention to maintain confidentiality. (*1) Another exception known as a limited waiver of privilege extends to parties who disclose otherwise privileged information in order to comply with statutory obligations. Limited waiver privilege has been recognized where business records divulged to an auditor were subject to a “limited waiver” such that privilege was waived solely for the purposes of the audit. (*2) Subject to the court’s discretion, an exception to a finding of waiver may also be made where a privileged document is inadvertently disclosed to a third party. (*3) In Iggillis Holdings Inc. v. MNR, (“Iggillis”) the Federal Court of Appeal recognized transactional common interest privilege (“TCIP”), also known as “deal privilege” in the transactional context as another exception to the general rule, causing corporate and tax lawyers nationwide to embrace in brotherly cheer. (*4) The Court of Appeal’s unanimous decision overturned the Federal Court’s 2016 decision, which refused to recognize TCIP. As explained by Mr. Justice Annis for the Federal Court in the first instance before the appeal:
“Courts are not prepared to fetter their truth-seeking legal process, unless it is clearly demonstrated that it is essential to do so. Only something as essential as the need for confidentiality in maintaining the solicitor-client relationship—without which the administration of justice cannot function—will do. The administration of justice has and will function quite nicely without advisory CIP” (*5)Mr. Justice Webb for the Court of Appeal disagreed with the lower court’s assessment, and confirmed the legitimacy of TCIP not only as a valid principle of law, but also as instrumental to the facilitation of commercial transactions in Canada, and in the best interests of all parties concerned. (*6) In Iggillis, counsel for each of two parties joined forces to draft a memo providing tax advice with respect to a series of transactions between the parties. Following completion of the transactions, the Minister of National Revenue served a requirement under the Income Tax Act for production of the memo on each of the parties. The Court ultimately found that the memo was protected by solicitor-client privilege, and held that privilege is not waived when advice provided by one’s counsel “is disclosed, on a confidential basis, to other parties with sufficient common interest in the same transactions.” (*7) The Iggillis decision by no means creates a novel exception to the general rule with respect to waiver of privilege. Prior to the lower court’s decision in Iggilis, provincial Superior Courts across the country had recognized the common interest or deal privilege exception on a case-by-case basis, so long as: i) the parties intended that the information divulged remain confidential; ii) the parties have a common interest in completing a given transaction; and iii) the exchange of the otherwise privileged information was done in contemplation of furthering that common interest. (*8) As noted by the Canadian Bar Association, which intervened in Iggillis to assist the Court of Appeal in fully canvassing the underlying implications of waiver of privilege,
“Canadian lawyers operate in transactional fields where multiple clients benefit from a common understanding of the law governing their transaction. The issue arose in a tax case, but it applies in contexts as varied as M&A, environmental, competition, IP, securities, real estate, divorce and matrimonial, and wills and estate law.” (*9)We have yet to see whether the court’s reasoning in Iggillis will have any impact in circumstances outside of the transactional context where issues of privilege and waiver are raised. Until then, stay tuned! Janice C. Pereira Articling Student Endnotes (*1) Pritchard v. Ontario (Human Rights Commission), 2004 1 SCR 809. (*2) Interprovincial Pipe Line Inc. v Canada (MNR), 1995 FCJ 1360. (*3) R v. Bruce Power Inc., 2009 ONCA 573. (*4) Iggillis Holdings Inc. v. Canada (MNR), 2018 FCA 51 [“Iggillis”]. (*5) Iggillis Holdings Inc. v. Canada (MNR), 2016 FC 1352 at 223. (*6) Supra note 4. (*7) Ibid at 41. (*8) Maximum Ventures Inc. v. De Graaf, 2007 BCCA 510. (*9) Faguy, Y. The CBA’s intervention on common interest privilege. Canadian Bar Association: National magazine, October 2017. 5. Doing Business in Canada – Part 11 (*1) – Intellectual Property Individuals and industries create value by securing exclusive rights in the form of patents, trademarks, copyrights, industrial designs, and trade secrets, among other forms of intellectual property, and then commercializing these rights to extract value. People occasionally confuse patents with trademarks, copyrights, industrial designs and integrated circuit topographies. Like patents, these others are rights granted for intellectual creativity and are forms of IP. However, there are important differences: Patents cover new and useful inventions (product, composition, machine, process) or any new and useful improvement to an existing invention. Trademarks may be one or a combination of words, sounds or designs used to distinguish the goods or services of one person or organization from those of others. Copyright provides protection for literary, artistic, dramatic or musical works (including computer programs) and other subject-matter known as performer’s performances, sound recordings and communication signals. Industrial designs are the visual features of shape, configuration, pattern or ornament, or any combination of these features applied to a finished article. Integrated circuit topographies are the three-dimensional configurations of electronic circuits embodied in integrated circuit products or layout designs. Domain Names are a form of intellectual property and can be very valuable to individuals and companies. Trade Secrets may pose certain problems for owners. Patents Technology innovation and inventions are the lifeblood of many companies, and patents help protect the value of these innovations and inventions. If an inventor or other owner of the invention obtains patent protection, they are granted the statutory right to exclusively make, sell and use the invention. In exchange for this exclusivity, the inventor must disclose sufficient information about the invention to allow others to make and use the invention after the patent expires. The maximum term of a Canadian patent is 20 years from the date of filing of an application. Canada has adopted a first-to-file rule, so the person entitled to obtain a patent for an invention is the first person to file a patent application for the invention. Canada is also a member country of the Patent Cooperation Treaty (“PCT”). This provides a patent applicant with a cost-effective method to file internationally, including in Canada. Canada, belongs to the Paris Convention for the Protection of Industrial Property, a treaty that allows an owner to invoke what is called “convention priority.” This means that the owner’s filing date in one member country will be recognized by all the others provided the owner files in those countries within a year of the first filing. For example, if an owner filed in Canada on January 2, 2004, the owner could file up to one year later in most countries (January 2, 2005) and still be given the same filing rights as if the owner had filed there in 2004. Subject matter that is patentable in Canada is generally similar to what is patentable in most other patent systems. While there are clear restrictions in Canada on patenting methods of medical treatment and higher life forms, recent jurisprudence has allowed at least some business method patents. There are three basic criteria for patentability—novelty, utility and inventiveness: Novelty—To be granted a patent, the invention (door lock) must be the first of its kind in the world. Utility—A valid patent cannot be obtained for something that does not work or that has no useful function. The door lock must work. Inventiveness—To be patentable, your invention must be a new development or an improvement of an existing technology that would not have been obvious to someone working in your area of specialty. The door lock must add an improvement to the field of door locks. To be granted a patent, the invention can be: – a product (a door lock) – a composition (a chemical composition used in lubricants for door locks) – a machine (a machine for making door locks) – a process (a method for making door locks) – an improvement on any of these Trademarks A company’s brand helps set it apart from its competitors. A trademark is a critical part of a company’s brand that helps its customers easily identify its products and services from its competitor’s offerings. In Canada, a trademark can be a word, a design, a combination of words and designs or other distinctive identifiers (such as shape, colour and sound). Registration of a trademark provides substantial benefits. Most significantly, registration grants the owner the exclusive right to use the registered trademark for specific goods and services and to enforce the trademark throughout Canada. Registration also provides certain remedies for infringement that are not available to or for unregistered trademarks. Registering a trademark, protects it under law from misuse by others, gives exclusive rights to the owner to use it throughout Canada for 15 years (a term that can renewed). In Canada, a trademark owner must control the character or quality of its licensees’ goods or services. This legislative requirement applies even when the owner permits one of its subsidiaries to use the owner’s trademark. Failure to do so may prejudice the trademark owner’s interest in its trademark. The entire registration process takes approximately 14 to 18 months, if no objections or oppositions are encountered. Copyright A poem, painting, musical score, performer’s performance, computer program—all are valuable creations, although perhaps no one can measure their worth. Some works may earn a lot of money in the marketplace, while others earn none at all. Regardless of their merit or commercial value, Canadian law protects all original creative works, provided the conditions set out in the Copyright Act have been met. In the simplest terms, “copyright” means “the right to copy.” In general, copyright means the sole right to produce or reproduce a work or a substantial part of it in any form. It includes the right to perform the work or any substantial part of it or, in the case of a lecture, to deliver it. If the work is unpublished, copyright includes the right to publish the work or any substantial part of it. Copyright also applies to performers’ performances, sound recordings and communication signals, though the applicable rights may differ somewhat. For example, the copyright in a sound recording consists of the sole right to publish the sound recording for the first time, to reproduce it in any material form, to rent it out and to authorize any such acts. Generally, copyright lasts for the life of the author, the remainder of the calendar year in which the author dies, and for 50 years following the end of that calendar year. Therefore, protection will expire on December 31 of the 50th year after the author dies. Copyright applies to every original literary, dramatic, musical and artistic work where the author was at the date of the making of the work a citizen or subject of, or a person ordinarily resident in, Canada or some other treaty country. (A treaty country is defined as a Berne Convention country, a Universal Copyright Convention country or a World Trade Organization [WTO] member.) Canada has acceded to the World Intellectual Property Organization (WIPO) Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT). Many of the substantive provisions in the WCT and WPPT, such as the establishment of a “making available” right and the implementation of technical protection measures, were implemented in a major revision to the Copyright Act that came into force in November 2012. Copyright also applies when a work is first published in a treaty country even if the author was not a citizen or subject of, or a person ordinarily resident in, Canada or some other treaty country. Copyright does not need to be registered in Canada. If the author qualifies and the work meets the necessary requirements, then that work will be protected by copyright in Canada. Registration, however, provides certain benefits, such as establishing the existence of the copyright, and creating a presumption of ownership that helps an owner enforce the copyright. There are no time limits to register a copyright. Industrial Designs Industrial designs protect the original features of shape, configuration, pattern or ornament, and any combination of those features that, in a finished article, appeal to, and are judged solely by, the eye. For example, the shape of a table or the shape and decoration of a spoon may be industrial designs. The registration of a design by the owner of an original industrial design gives the owner the exclusive right to it. The Industrial Design Act, like other intellectual property legislation, protects owners and also helps people share what they know in an orderly way. The rights obtained by registration in Canada only grants rights in Canada but not in other countries. The owner needs to apply for registration in other countries for protection in those countries. Foreign registrations do not protect industrial designs here in Canada. Registering an industrial design will provide an exclusive right to the design for up to 10 years after registration. Once registered, articles using the design must be marked, to put others on notice that a design registration exists. Failure to mark articles properly may prevent recovery from an infringer, and such failure could also invalidate the design registration. Canada is signatory to the Paris Convention for the Protection of Industrial Property. The Paris Convention allows applicants to request “convention priority”. This means that someone who has filed an application for industrial design registration in one Convention country will have six months to file an application for the same design in another Convention country and get the same filing date as that given to the first application. Owners have the exclusive right in Canada to make, import for trade or business, rent or sell the article incorporating that design. Owners may also sell all or some of the rights to another party through a transaction known as an “assignment”, or the owner can simply authorize others to use the design subject to stated conditions (known as a “licence”). Assignments must be in writing, but there are no standard forms for this. Assignments may be recorded with the Industrial Design Office against both pending and registered designs. The requirements for recording licences with the Industrial Design Office are the same as those for assignments. Integrated circuit topographies Integrated circuit topographies refer to the three-dimensional configurations of electronic circuits embodied in integrated circuit products or layout designs. They are at the heart of modern technology, communications, entertainment, manufacturing, medical and space technologies, and are now found in items as ordinary as household appliances. The Integrated Circuit Topography Act and Integrated Circuit Topography Regulations refer to “microchips,” a form of integrated circuit, as “integrated circuit products.” Integrated circuit products are constructed from a complex series of layers of semiconductors, metals, dielectrics (insulators) and other materials on a substrate. The Act and Regulations refer to the three-dimensional configurations of these layers as an “integrated circuit topography.” The Act provides protection against copying of registered topographies but does not prevent others from developing integrated circuit products that use other topographies to provide the same electronic functions. The Integrated Circuit Topography Act gives owners of registered topographies exclusive legal rights to control certain actions. Owners of registered topographies can exclude others from: – reproducing a protected topography or any substantial part of one; – manufacturing an integrated circuit product incorporating a protected topography or a substantial part of one; – importing or commercially exploiting (i.e., selling, leasing, offering or exhibiting for sale or lease, or other commercial distribution) a protected topography or a substantial part of one, or an integrated circuit product that embodies a protected topography or a substantial part of one; and – importing or commercially exploiting an industrial article that incorporates an integrated circuit product that embodies a protected topography or a substantial part of one. There are exceptions where the exclusive rights to a registered topography are not infringed. For example, it is not an infringement when a person reproduces the topography for the sole purpose of analyzing, researching, or teaching about the integrated circuit topography. The Act protects registered the integrated circuit topography for up to ten years from the filing date of the application for registration. The term ends on December 31 of the tenth year after the year of the first commercial exploitation, or the year of the filing date, whichever came first. Domain Names The internet’s domain name system and the internet-based practice of meta-tagging present the intellectual property system and especially trade-mark law with some interesting challenges. The conflict between the registered trade-mark system and a domain names registry is the result of domain name registrations following a “first-come, first-served” policy, without an initial, independent review of whether the name being registered is another person’s registered trade-mark. In Canada a “.ca” registrant must meet certain Canadian-presence requirements. However, there is no independent review of the requirement. The owner of a trademark in Canada may reserve only those domain names that consist of or include the exact word component of that registered trademark. Cyber-squatters present problems to trade mark owners. To gain control of a domain name, it may be possible to argue “depreciation of goodwill” under Section 22 of the Trade-marks Act as well as misappropriation of personality rights. This involves litigation. The Canadian Internet Registration Authority (CIRA) Domain Name Dispute Resolution Policy (CDRP) is an online domain name dispute resolution process for the “.ca” domain name community. One- or three-member arbitration panels consider written arguments and render decisions on an expedited basis. Among other features, the CDRP permits a panel to award costs of up to C$5,000 against a complainant found guilty of reverse domain name hijacking. Trade secrets Owners of trade secrets may be tempted to protect their creation by simply keeping its information secret and selling the creation. The information is then known as a trade secret. (The recipe for Coca-Cola is an example of a trade secret.) Owners will run into problems, however, if another person independently invents or discovers the subject matter of the trade secret. There is nothing to prevent that person from using it, applying for a patent or publishing the information. The benefit of keeping a trade secret is that the owner does not have to make the innovation public as when they are granted a patent. Rui M. Fernandes Follow Rui M. Fernandes on Twitter @RuiMFernandes and on Linkedin. See also his blog at http://transportlaw.blogspot.ca Endnotes (*1) This article is part 11 of 17 parts dedicated to a review of doing business in Canada. Subsequent articles will include Privacy, Real Property, Environmental Laws, Taxation, Insolvency, Litigation and ADR. 6. Termination provisions in employment contracts: How to effectively limit damages when terminating without cause Depending on the nature of the business, it can be prudent practice for an employer to incorporate provisions in written contracts of employment limiting employee recovery, so as not to be exposed to paying large damages claims. In order for such clauses to be enforceable, however, it is critical that the termination clause in the contract be crafted in such a way that there are no circumstances in which a dismissed employee would get less than the minimum compensation to which he is entitled under relevant employment standards legislation. Great care needs to be taken in drafting such provisions, since the courts, mindful of the vulnerability of employees, will invariably look to any ambiguity in the contract in order to void the entire termination clause, thus opening up a claim against the employer for damages under the common law. The Court of Appeal for Ontario has recently weighed in once again on just what is required in an employee termination provision of an employment contract in order for it to effectively limit the damages an employer will have to pay in dismissing one of its workers. Its decision in Amberber v. IBM Canada Ltd. (*1) provides important guidance to employers in drafting such provisions, since this was one of those increasingly rare occasions in which the employer was successful in enforcing the termination clause in its employment contract. The Facts Noah Amberber had joined IBM Canada Ltd. (“IBM”) on March 30, 2015. Prior to that time, he had worked for an IBM customer. In his written employment contract with IBM, his prior service with the IBM customer was formally recognized, and under the new contract he was thus treated as having worked for IBM for most purposes – including in case of termination – since the commencement of his prior employment in September 2000. Under the termination provision of the contract, IBM was required, when terminating employment other than for “cause”, to pay the greater of one month’s base salary or one week of base salary for each 6 months of completed service, up to a maximum of 12 months. The contract also included what the motions judge had described as a “failsafe” provision, which read as follows:
In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment. (*2)The purpose of such clauses is to ensure that the employer is never offside the requirement to pay an employee the minimum amounts required under employment standards legislation. Employment termination provisions have often come to grief for poorly drafted failsafe provisions, since the courts will invariably read any ambiguity in such clauses against the interests of the employer. Where they find even a theoretical possibility that a failsafe provision might result in an employee getting less than his statutory entitlement, the courts have typically proceeded to void the entire provision, leaving the employee free to pursue the employer for their common law entitlements, which are often around one month’s pay for every year of service. Mr. Amberber was terminated by IBM effective July 8, 2016. In terminating his employment, IBM paid him his entitlement under the contract. Mr. Amberber responded by suing IBM for his full entitlement to damages for wrongful termination under the common law. IBM’s Motion for Summary Judgment IBM, thinking it had an enforceable termination clause, brought a summary judgment motion against Mr. Amberber to dismiss his action. Significantly, the motions judge found that the failsafe clause was effective as worded to ensure that in no hypothetical case would the employee be deprived of at least the minimum payments required under the Employment Standards Act, 2000. Where the motions judge did find ambiguity, however, was in the clause that specified that the payments under the termination provision would be the only ones to which Mr. Amberber was entitled, what she termed the “inclusive payment” provision. Because the contract wording that limited Mr. Amberber’s recovery occurred between the provision stipulating his termination pay and the failsafe provision, she held that it was not “clear” that it applied equally to the failsafe language at the end of the relevant clause (*3) The motions judge consequently dismissed IBM’s motion. IBM appealed the ruling that the termination provision was ambiguous, and Mr. Amberber cross-appealed on the finding that the failsafe provision specifically, and thus the entire termination clause, was in compliance with the requirements of the Employment Standards Act, 2000. The Appeal On appeal, Mr. Amberber unsuccessfully argued that the so-called failsafe provision acted to sever this part of the termination provision from the rest of the contract, meaning that it sought to remove the payment provision from the rest of the contract just in case it might be non-compliant with the Employment Standards Act, 2000. In advancing this argument, Mr. Amberber had hoped to rely on earlier decisions of the Court that found such provisions to violate employment standards law. In this case, however, the Court of Appeal disagreed that the failsafe clause in question had this effect, stating that the last sentence of the failsafe clause was effective language to ensure that any damages payable to Mr. Amberber would always meet the minimum requirements of the Act. In this, it distinguished this case from the clause under consideration in its earlier decision in North v. Metaswitch Networks Corp. (*4). The Court also found that the motions judge had gone too far in attempting to find ambiguity in the contract, rendering her approach a reviewable error of law. In so finding, however, the Court was careful to reaffirm the principle that employment contracts have a special status in contract law, and that genuine ambiguity – that is, where a clause can have two reasonable yet conflicting interpretations – will normally be resolved in favour of the employee. Nevertheless, it held that courts are obliged to read contracts as a whole, and not “piecemeal,” and that this principle applied equally to employment contracts as it would to any other form of contract. It thus concluded, following one of its earlier decisions, that “[t]he court should not strain to create an ambiguity where none exists” (*5). On the summary judgment motion the motions judge had found that the mere positioning of the “inclusive payment” language between the termination pay provision and the “failsafe” portion of the termination clause created an ambiguity. For the Court of Appeal, this was, at least in this case, a bridge too far. Conclusion Amberber is an encouraging case for employers, in that it now provides them with at least some guidance as to how to craft an effective “failsafe” provision in the termination clause of an employment contract. On the other hand, it reinforces the lesson that there is no room for complacency when attempting to craft a termination provision that will effectively limit the amount to be paid to an employee on dismissal. The fact that the case was only resolved on appeal underlines the lesson that the courts have had, and will continue to have, a strong bias in favour of dismissed employees when ruling on the enforceability of termination provisions. It is therefore advisable to continually update these provisions, particularly, as here, when the Court of Appeal has kindly shown us at least a narrow path along which they can be enforced. Oleg M. Roslak Endnotes (*1) 2018 ONCA 571 [Amberber]. (*2) Amberber at para. 13. (*3) Amberber at para. 17. (*4) 2017 ONCA 790, 417 D.L.R. (4th) 429. (*5) Amberber at para. 63, citing Chilton v. Co- Operators General Insurance Co. (1997), 32 O.R. 161 (C.A.), at p. 169. 7. Duty of Care of Food Producers to Others in the Supply Chain In 2008, certain ready to eat (“RTE”) meats manufactured by Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc. (collectively, “Maple Leaf”) were contaminated with listeria at dangerous levels, that resulting in some people falling seriously ill and some dying after consuming the meat. Maple Leaf voluntarily closed its production plant and recalled the contaminated meats as well as other products made at the plant, two of which were RTE meats used by franchisees of Mr. Submarine Ltd. (“Mr. Sub”). This resulted in a class action by Mr. Sub franchisees against Maple Leaf for economic losses that they allegedly suffered as a result of reputational harm connected with negative media reports and the recall. The lower level of court ruled in favour of the franchisees on the basis that Maple Leaf owed them a duty of care to ensure that the meat was fit for human consumption. Maple Leaf appealed this decision and the Court of Appeal decided in favour of Maple Leaf. (*1) Background The contract between Mr. Sub and Maple Leaf required Mr. Sub to purchase 14 core menu items, including the applicable RTE meats exclusively from Maple Leaf. However, there was no corresponding obligation on Maple Leaf to supply the RTE meats to Mr. Sub or its franchisees, meaning that Maple Leaf could have stopped supplying any of the core menu items at any time. The relationship between Mr. Sub and its franchisees was governed by a franchise agreement which required the franchisees to purchase products exclusively from Mr. Sub-approved suppliers. (*2) In August 2008, the Canadian Food Inspection Agency (the “CFIA”) warned Maple Leaf that there might be an issue with some of its products, but the warning did not relate to any products used by the franchisees. (*3). More than a week later, the CFIA advised Maple Leaf that one product tested positive for listeria and within hours of that notification (at 3:30 am), Maple Leaf issued a nationwide press release and notice of recall on two products – neither of which were used by the franchisees. (*4) It was determined a few days later that there was possibly a larger issue at the production plant where the contaminated product was made, and Maple Leaf expanded the voluntary recall to include two of the core menu items used by the franchisees. Maple Leaf eventually decided to expand the recall to 191 products and shut down the plant until the issue could be remedied. (*5) Media reports on the outbreak made a connection between Maple Leaf and Mr. Sub, as well as McDonalds and other restaurants. Maple Leaf communicated with Mr. Sub, provided messages intended for its franchisees, and set up a hotline to deal with any questions. (*6) Distributors were paid by Maple Leaf to attend the franchisees’ premises to retrieve the two core menu items affected by the recall and provided a credit to the distributors, which Maple Leaf believed would then be issued to the franchisees. Maple Leaf also assisted Mr. Sub with finding a new supplier for those two products (one was located) but by October, Maple Leaf was back up and running. (*7) Maple Leaf reached a settlement agreement with Mr. Sub that involved a price reduction in products sold to Mr. Sub, which Maple Leaf believed would be passed on to the franchisees. (*8) The franchisees alleged that the association between Mr. Sub and Maple Leaf in the media resulted in harm to the reputations of the franchisees and gave their competitors an advantage. They also argued that since customers did not want to eat at their restaurants and because it was not possible to purchase replacement products for a period of time, “Maple Leaf’s negligence ultimately led to [Mr. Sub’s] demise as a viable business.” (*9) The franchisees stated that they suffered a loss of sales, profits and goodwill, and were required to take remedial measures to protect their customers. (*10) Maple Leaf emphasized that there was no evidence that any contaminated RTE meats actually reached the franchisees stores or that either of the two core menu items that were recalled ever tested positive for listeria. (*11) What the Courts had to Say The lower court judge ordered that Maple Leaf owed a duty of care to the franchisees in relation to the production, processing, sale and distribution of the RTE meats and described the duty as one to supply a product fit for human consumption. (*12) The judge held that there was a close and direct relationship between the parties, given that Maple Leaf was the exclusive supplier, and that Maple Leaf had supplied the franchisees with a defective product dangerous to public health, knowing that the product would be offered for sale to consumers who could be injured from such consumption, thereby resulting in economic loss to the franchisees. (*13). Maple Leaf appealed this decision, and the Court of Appeal granted Maple Leaf’s appeal. The franchisees argued that as a manufacturer, Maple Leaf was subject to the recognized duty of care to those in its supply chain not to manufacture and provide a product that has become dangerous as a result of negligence. (*14) However, in contrast to other cases where the manufacturers had put products into the marketplace that they knew to be dangerous, Maple Leaf voluntarily recalled the products to safeguard human health as soon as it knew that its products could be dangerous. Additionally, no one was harmed from eating Maple Leaf meats at a franchisee’s restaurant. (*15) The Court of Appeal held that to the extent that there may have been a duty to supply meat fit for human consumption, it did not extend to the franchisees’ damages for the pure economic loss in question. (*16) The duty to supply meat fit for human consumption is aimed at protecting human health and was owed to the franchisees’ customers, not to the franchisees. The alleged damages here were mainly a result of the negative publicity related to the death and illness of individuals who did not eat at a Mr. Sub restaurant, and the recall of the meat. (*17) If the duty of care extended to protecting the franchisees from economic loss relating to loss of sales, goodwill and profits, the Court of Appeal stated that this would result in an enlargement of the duty to include a completely different duty to protect against reputational harm, an enlargement which would be unwarranted. (*18) As an alternative, the franchisees argued that Maple Leaf had a duty to ensure that it did not misrepresent that the meats would be fit for human consumption and pose no risk of harm, and that they relied on this misrepresentation. (*19) The Court of Appeal recognized that while Maple Leaf did undertake to supply meat that was safe for human consumption to Mr. Sub customers, the nature of this undertaking was not to protect the reputation of the franchisees but rather the ensure that the customers would not become ill by consuming the products. (*20) The Court also went on to say that the alleged losses were not reasonably foreseeable as the reputational harm that the franchisees alleged that they sustained from Maple Leaf’s supply to others of contaminated products and the recall of potentially contaminated meat from the franchisees fell outside of the scope of the undertaking made by Maple Leaf. (*21) Future Considerations In summary, the Court decided that any duty of care owed by Maple Leaf with respect to ensuring that its meat products were safe for human consumption extended only to the customers of the Mr. Sub franchisees and not to the franchisees themselves for economic losses sustained as a result of reputational harm connected to negative media blasts and the recall of potentially contaminated meats from their stores. Manufacturers and producers of food products should be aware of this duty to the ultimate consumer to ensure that their products are fit for human consumption. If a consumer were to become ill as a result of a contaminated product, a manufacturer may be able to protect itself by showing that it has a robust plan in place to avoid contamination, and that it has actually implemented the plan and engages in ongoing monitoring of the effectiveness of its plan. With the incoming Safe Food For Canadians Act (“SFCA”) that will soon become law. On January 15, 2019, all food manufacturers and others in the supply chain who are engaged in certain activities, such as manufacturing, processing, growing, labelling, packaging, storing, importing, exporting, trading interprovincially, and transporting food (unless your sole purpose is the transportation), will now be subject to statutory duties relating to food commodities that are much more expansive than in the past. Depending on the activity, these requirements under the SFCA include everything from obtaining a licence, to having a written preventative control plan in place, to ensuring that all facilities, equipment (including trailers), and personnel comply with cleanliness and sanitation-related requirements. Those involved in the food industry should also review their contracts with their suppliers and third-party service providers to ensure that each party’s responsibilities under the SFCA are accurately captured. Where a third party has better control over something for which another party is responsible under the SFCA, the parties should ensure that risk and liability is properly allocated among them contractually. In a situation like the one between Maple Leaf and Mr. Sub franchisees, had the Mr. Sub contract included a clear allocation of risk and properly set out each party’s obligations, for example, a clause that outlined whether or not Maple Leaf would be required to indemnify the franchisees for reputational losses, the decision may have been decided based on clear contract terms rather than on negligence laws. Having a well-drafted and thought out contract where both parties have negotiated and decided upon who will bear what risks can provide more certainty between the parties and possibly avoid drawn out litigation. Jaclyne Reive Twitter: @jaclyne_reive Blog: https://jaclynereive.wordpress.com Endnotes: (*1) 1688782 Ontario Inc. v Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc., 2018 ONCA 407. (*3) Ibid., at 7-8. (*4) Ibid., at 10. (*5) Ibid., at 11. (*6) Ibid., at 12 (*7) Ibid., at 15-16 (*8) Ibid., at 17. (*9) Ibid., at 19. (*10) Ibid., at 20. (*11) Ibid., at 35. (*12) Ibid., at 23 (*13) Ibid., at 28. (*14) Ibid., at 44. (*15) Ibid., at 54. (*16) Ibid., at 63. (*17) Ibid., at 65. (*18) Ibid., at 66. (*19) Ibid., at 79. (*20) Ibid., at 80. 8. Rail Carriage – Provision of Railcars Canadian National Railway Company v. Emerson Milling Inc. and Canadian Transportation Agency (2017 FCA 79) Background Emerson Milling Inc. (“Emerson”) ordered railcars from the Canadian National Railway Company (“CN”) to transport crops during a bumper year. CN failed to deliver all of the railcars ordered. Emerson complained to the Canadian Transportation Agency (“CTA”) alleging that CN had failed to receive, carry and deliver “traffic offered for carriage”, and had therefore violated subsection 113(1) of the Canada Transportation Act (the “Act”). CN argued that Emerson’s orders for railcars were unreasonable and that CN had acted as reasonably as it could under the circumstances. The CTA sided with Emerson and ordered CN to provide the railcars that Emerson required. CN appealed. The Federal Court of Appeal held that CN’s appeal should be dismissed. Issues The decision discussed the following issues:
- Whether CN’s appeal raised a question of law or a question of jurisdiction pursuant to subsection 41(1) of the Act.
- a) Whether the CTA applied the wrong evidentiary threshold and onus such that it conflated a railcar order request placed by a shipper with “traffic offered for carriage” under subsection 113(1) of the Act.
- b) Whether the CTA applied the wrong legal test in determining whether CN had breached its level of service obligations by treating unfulfilled railcar order requests in a given week as constituting cumulative “traffic offered for carriage” under subsection 113(1) of the Act in subsequent weeks, months and years.
- Whether the CTA’s decision was reasonable.
“When the Agency interprets subsection 113(1), it legitimately draws upon its regulatory experience, its knowledge of the industry and its expertise in the transportation sector (….) Provided the Agency adopts a defensible interpretation of subsection 113(1) and a defensible methodology or test for determining reasonable conduct, and provided it applies these things in a manner that is alert and responsive to the evidence before it, this Court must refrain from second-guessing. The reasonableness of the parties’ conduct based on the particular facts disclosed by the evidentiary record—the factually suffused merits of the case—is a matter very much within the ken of the Agency, not us.” (*6)The CTA adopted an “evaluation approach” in which it asked the following questions: 1) Is the shipper’s request for service reasonable? 2) Did the railway company fulfil this request? 3) If not, are there reasons which could justify the service failure? a) If there is a reasonable justification, then the Agency will find that the railway company has met its service obligations; b) If there is no reasonable justification, then the Agency will find that there has been a breach of the railway company’s service obligations and will look to the question of remedy. (*7) The Court concluded that the CTA’s evaluation approach was reasonable and practical. “The first question under the evaluation approach – whether the shipper’s request for service is reasonable – reflects the Agency’s view that only bona fide, reasonable requests by shippers for traffic on the railway can meet the requirement in subsection 113(1) of the Act that there be “traffic offered for carriage on the railway.” For example, the railway company’s obligations under subsection 113(1) are not triggered by groundless, outlandish requests.” (*8) The CTA’s approach to subsection 113(1) of the Act was to look at the situation globally and to assess overall whether CN had fulfilled its reasonable obligations under the Act over a period of time. The Court concluded this approach was acceptable and reasonable. The Federal Court of Appeal dismissed CN’s appeal. Leave to appeal to the SCC was refused (2018 CanLII 7101). Andrea Fernandes Endnotes (*1) Canadian National Railway Company v. Emerson Milling Inc. 2017 FCA 79 (“CN”) at para 19 (*2) CN at para 26 (*3) CN at para 37 (*4) CN at para 46 (*5) CN at para 52 (*6) CN at para 73 (*7) CN at para 75 (*8) CN at para 79
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