E-TIPS® Newsletter’s “2021: Year in Review”

Thank you for your readership over the last year and welcome to what we hope will be a better 2022!  In this year’s first issue of the E-TIPS® Newsletter, we will recap our most noteworthy reports from 2021, covering developments in intellectual property (IP) and information technology (IT) law under the following categories: (1) “Supreme Court of Canada Matters”, (2) “Legislative, Treaty and Policy Developments” (3) “Patents”, (4) “Trademarks”, (5) “Copyright”, (6) “Privacy”, and (7) “Legal Developments in Emerging Technology Around the World”.

This issue of E-TIPS® Newsletter’s “2021: Year in Review” is brought to you by Michelle Noonan, Anna Troshchynsky, and Steffi Tran.  Remember, all of our past coverage – over 19 years’ worth – is accessible in our archive.

1. Supreme Court of Canada Matters

Contracting Parties Have a Duty to Exercise Contractual Discretion in Good Faith

In February 2021, the Supreme Court of Canada (SCC) in Wastech Services Ltd. v Greater Vancouver Sewerage and Draining District, 2021 SCC 7, found that contracting parties have a duty to exercise contractual discretion in good faith and that this duty “operates in every contract irrespective of the intentions of the parties”.  The SCC held that parties are required to exercise their contractual discretion “in a manner consistent with the purpose for which it was granted in the contract” and this duty is breached when a party exercises its discretion “unreasonably” or “in a manner unconnected to the purposes underlying the discretion”.  Furthermore, while the intention of the parties may not be relevant as to whether this duty of good faith applies, it is a critical component in assessing the reasonableness of a particular exercise of contractual discretion.  The SCC clarified that the duty does not require a party to “subordinate” or “subvert” its interests to those of the other party, nor to confer a benefit on the other party that goes beyond the purposes for which the discretion was agreed.  Click here for our full report.

The appeal was heard together with C.M. Callow Inc. v Zollinger, 2020 SCC 45, in which the SCC provided clarity on the duty of honest performance in a contract, as reported by the E-TIPS® Newsletter here.

York University Not Obligated to Pay Copyright Board Tariffs

In July 2021, in York University v Canadian Copyright Licensing Agency (Access Copyright), 2021 SCC 32, the SCC unanimously held that the tariff in question was not mandatory, nor enforceable against York University (York).  The Copyright Board had granted Access Copyright’s request for an interim tariff, to operate until a final tariff was approved.  York initially paid the approved royalties and later opted out of the tariff system, not continuing as a licensee.  The SCC found that Section 68.2(1) of the Copyright Act did not empower Access Copyright to enforce royalty payments set out in a Board approved tariff against a user who chose not to be bound by a licence on the approved terms.  The SCC further held that Section 68.2(1) does not provide for a collective infringement remedy.  Lastly, the SCC noted that the lower courts’ fair dealing analysis should have considered the perspective of students who use the materials.  Our report on the decision can be found here.

Clarification on Limitation Periods and Discoverability

Also in July 2021, the SCC in Grant Thornton LLP v New Brunswick, 2021 SCC 31, held that a claim is discovered, and the limitation period begins to run, when the plaintiff has actual or constructive knowledge “of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn”.  The SCC found that both the common law rule of discoverability and New Brunswick's Limitations of Actions Act established that the limitation period is triggered when the plaintiff discovers or ought to have discovered, through the exercise of reasonable diligence, the material facts on which the claim is based.  The SCC clarified that certainty of liability and knowledge of all the constituent elements of the claim is not required to discover it.  Our full report on this decision can be found here.

Non-Liability Clause Upheld Under Québec Law

In October 2021, the SCC issued its decision in 6362222 Canada inc. v Prelco inc., 2021 SCC 39, finding that the doctrine of fundamental breach did not render a non-liability clause inoperative under the Civil Code of Québec (Code).  6362222 Canada inc. (Createch) and Prelco inc. (Prelco) entered into an agreement whereby Createch would implement an integrated management system (Contract), which Prelco later terminated.  The Contract contained a non-liability clause limiting Createch’s liability to the fees paid by Prelco to Createch under the Contract and excluding certain damages.

The SCC found that the non-liability clause was valid despite the breach of a fundamental obligation alleged against Createch.  The SCC held that (i) the Code does not prohibit non-liability clauses relating to fundamental obligations in contracts between sophisticated parties; (ii) no authority establishes a breach of a fundamental obligation as a separate category of fault; and (iii) the non-liability clause was unambiguous.  Click here for our full report.

2. Legislative, Treaty and Policy Developments

Québec’s Bill 64 Receives Royal Assent, Signalling Major Privacy Reform

In September 2021, Québec’s privacy reform bill, Bill 64, An Act to modernize legislative provisions as regards the protection of personal information (Bill 64) received royal assent.  Bill 64 introduces substantial changes to Québec’s framework for the protection of personal information and imposes new obligations on regulated private and public sector entities.  Most provisions will come into force on September 22, 2023, two years after Bill 64’s date of assent.  Our report on Bill 64 receiving royal assent can be found here.  For our two-part Client Advisory on Bill 64 and upcoming changes in privacy legislation, click here and here.

Ontario Passes Bill 27, Prohibiting Non-Compete Agreements and Requiring Disconnecting from Work Policies

In November 2021, the Ontario government passed Bill 27, Working for Workers Act, 2021 (Bill 27).  Bill 27 amends Ontario’s Employment Standards Act to prohibit employers from entering into “an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement”, with certain exemptions.  Bill 27 also introduces a requirement that employers with 25 or more employees must develop a written policy with respect to disconnecting from work.  Bill 27 defines “disconnecting from work” as “not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.”  Our reports on the introduction and passage of Bill 27 can be found here and here, respectively.

Examination Delays in Canadian Trademark Applications

The Canadian Intellectual Property Office (CIPO) continued to experience significant delays in examining Canadian trademark applications in 2021, with the backlog of applications awaiting first examination growing to almost 36 months.  The delays in examination may be attributed to the effects of the COVID-19 pandemic and CIPO’s prioritizing of certain applications over others.  For instance, 2021 was the first year that CIPO has allowed expedited examination of certain applications, where the applicant can file evidence that the application relates to medical goods or services related to COVID-19, or to prevent imminent or ongoing infringement.  CIPO has indicated that it hopes to clear the backlog of applications awaiting first examination by the end of 2022.  For our most recent report on trademark examination delays, click here.

3. Patents

Federal Court Clarifies Scope of Patent Agent Privilege

In November 2021, the Federal Court of Canada (FC) in Janssen Inc. et al. v Sandoz Canada Inc, 2021 FC 1265, clarified the scope of patent agent privilege under Section 16.1 of the Patent Act.  Janssen Inc. and Mitsubishi Tanabe Pharma Corporation (collectively, the Plaintiffs) sought an order from the FC determining that redacted portions of certain documents contained privileged information and that such privilege had not been waived.  The FC held that Parliament did not express an intention to attach privilege to any and all communications between patent agents and their clients, and that communications “relating to the protection of an invention” under Section 16.1 do not extend to an analysis as to whether a product infringes third party patent rights.  The FC found that in order to establish the existence of patent agent privilege, a communication must originally be between a patent agent and their client, intended to be confidential, and made for the purpose of seeking or giving advice with respect to any matter relating to the protection of an invention.  Click here for our full report.

Federal Court of Appeal Continues to Provide Clarity on File Wrapper Estoppel Provision

In January 2021, the Federal Court of Appeal (FCA) issued its decision in Canmar Foods Ltd. v TA Foods Ltd., 2021 FCA 7, providing guidance on how the file wrapper estoppel provision, Section 53.1 of the Patent Act, should be interpreted.  The FCA found that the lower court erred in considering the foreign prosecution history in this case, although the FCA declined to express a view on whether the prosecution history of a foreign application can ever be considered pursuant to Section 53.1.  The FCA also maintained that courts should be wary of extending the language of Section 53.1.  In obiter, the FCA noted that a strict reading of Section 53.1 does not sanction the use of the prosecution history as an independent, stand-alone aid to claim construction, although the prosecution history does play a role in construing claims to the extent that it may rebut a patentee’s representation.  Click here for our full report.

In August 2021, the FCA in Bauer Hockey Ltd. v Sport Maska Inc. (CCM Hockey), 2021 FCA 166, provided additional commentary on Section 53.1 and upheld the FC finding that the claims in issue regarding Bauer Hockey Ltd.’s (Bauer) patent were invalid for obviousness.  In obiter, the FCA stated that the purpose of Section 53.1 is “to provide a tool to use against patentees who take one position concerning the meaning of a claim during prosecution of a patent application and another during litigation on the resulting patent”.  Our report on the decision can be found here.

Overbreadth Confirmed as Valid Ground of Patent Invalidity

In July 2021, the FCA issued its decision in Seedlings Life Science Ventures, LLC v Pfizer Canada ULC, 2021 FCA 154.  Seedlings Life Science Ventures, LLC challenged the FC’s finding that the claims at issue of its patent were invalid for overbreadth.  The FCA confirmed that overbreadth is a proper ground of invalidity.  Specifically, a patent claim can fail for overbreadth if (i) the claim is broader than the invention disclosed in the specification; or (ii) broader than the invention made by the inventor.  The FCA also noted that one may consider overclaiming as a natural consequence of the bargain theory of patent law and that overbreadth might be considered the other side of the coin of insufficiency.  Click here for our full report.

Federal Court of Appeal Clarifies Test for Obviousness

In March 2021, the FCA issued its decision in Apotex Inc. v Janssen Inc., 2021 FCA 45, clarifying the test for obviousness to try in patent litigation proceedings.  The FCA confirmed that an invention is obvious if the person of ordinary skill in the art would have found it obvious to try, and that being “more or less self-evident” that what is being tried “ought to work” should be treated as a factor in the obviousness to try analysis, not as a requirement.  The FCA held that the FC in the present case committed no palpable and overriding error in concluding that although the combination of relevant components may have been “worth trying”, it “was not obvious to try”.  Our full report on this decision can be found here.

4. Trademarks

Federal Court Grants Expungement of NORSTEEL Trademark

In September 2021, the FC issued its decision in Norsteel Building Systems Ltd. v Toti Holdings Inc., 2021 FC 927. The FC granted an application by Norsteel Building Systems Ltd. (NBS) to expunge Toti Holdings Inc.’s (Toti) NORSTEEL trademark from the register on the basis that Toti was not entitled to secure the registration because of NBS’s prior use and making known of the NORSTEEL BUILDING SYSTEMS trademarks and trade names.  On the issue of bad faith, the FC noted that “where an applicant has knowledge that another entity in the same line of business is using the very word it wishes to register as a trademark, one would expect the applicant to conduct its due diligence regarding that other business before making the required statement.”  The FC concluded that Toti’s failure to make the obvious inquiries did not amount to bad faith.  Our report on the decision can be found here.   

Federal Court Finds Custom-Built Electric Bicycles Infringe Harley-Davidson’s Trademarks

In June 2021, the FC issued its decision in H-D U.S.A., LLC v Varzari, 2021 FC 620, finding that H-D USA, LLC and Harley-Davidson Canada LP had established trademark infringement, passing off, and depreciation of goodwill in relation to custom-built electric bicycles sold by Mr. Varzari.  The FC also found that Mr. Varzari’s use of modified Harley-Davidson parts constituted infringement and was not simply lawful reselling of trademarked goods since Mr. Varzari had altered and incorporated the parts into a new good in such a way that the new good, electric bicycles, bore the trademarks and suggested an association with Harley-Davidson.  Click here for our full report.

Federal Court Awards Damages for Infringement of SUBWAY Trademarks

Also in June 2021, the FC in Subway IP LLC v Budway, Cannabis & Wellness Store, 2021 FC 583, granted Subway IP LLC (Subway) injunctive relief and damages for infringement, passing off, and depreciation of goodwill of its registered trademarks in relation to a cannabis and wellness store’s use of BUDWAY.  The FC held that there was a likelihood of confusion between the respondents’ BUDWAY mark and Subway’s registered trademarks, as the marks had a high degree of resemblance and the nature of the goods overlapped.  On the issue of depreciation of goodwill, the FC held that the marks resulted in a mental linkage that was “inescapable” and the nature of the respondents’ goods was likely to depreciate the goodwill associated with Subway’s registered marks.  Our report on the decision can be found here.

Federal Court Dismisses Passing Off Claim Relating to LOCUST LANE Trademark

In February 2021, the FC issued its decision in Hidden Bench Vineyards & Winery Inc. v Locust Lane Estate Winery Corp., 2021 FC 156, dismissing an application by Hidden Bench Vineyards & Winery Inc. (Hidden Bench) against Locust Lane Estate Winery Corp. (LLEW) for passing off in relation to the unregistered trademark LOCUST LANE.  Both parties operate wineries on adjacent properties on Locust Lane, in Beamsville, Ontario.  Hidden Bench sought a declaration that it was the owner of the unregistered trademark and that LLEW’s use of the mark was likely to mislead the public.  The FC concluded that Hidden Bench did not establish the goodwill necessary to succeed in its passing off claim, as its evidence failed to show that Hidden Bench’s unregistered geographically descriptive mark had acquired a secondary meaning so as to make it distinctive of Hidden Bench.  Click here for our full report.

5. Copyright

Federal Court of Appeal Revives Certification of Reverse Class Action

In September 2021, the FCA in Salna v Voltage Pictures, LLC, 2021 FCA 176, reversed the FC’s decision to dismiss Voltage Pictures, LLC’s (Voltage) motion for certification of a reverse class action proceeding alleging file-sharing copyright infringement.  The FCA held that the FC erred in finding that Voltage’s pleadings did not disclose a reasonable cause of action by drawing conclusions on the merits of the claim.  The FCA also found that the FC erred concluding that Voltage did not establish an identifiable class of two or more persons, and improperly focused on how the outcomes of certain questions may be different for various class members.  The FCA acknowledged the novelty of the proposed reverse class action and noted that "the law must adapt to the evolving digital environment, the channels through which artistic endeavour is expressed and the means by which copyright may be infringed".  Click here for our full report on this decision.

Canada’s First Site-Blocking Order Upheld

In May 2021, the FCA issued its decision in Teksavvy Solutions Inc. v Bell Media Inc., 2021 FCA 100, upholding the decision of the FC to issue Canada’s first website-blocking order.  In 2019, a group of Canadian broadcasters (the Plaintiffs) filed an action for copyright infringement against two unidentified persons operating an unauthorized subscription service.  The Plaintiffs sought a site-blocking order requiring Internet service providers to impede access to the unauthorized service.  The FCA concluded that the FC was correct in determining that it had the power to grant the site-blocking order and did not err in finding that the order was just and equitable in the circumstances.  In August 2021, Teksavvy filed an application for leave to appeal to the SCC.  Our full report on this decision can be found here. 

Federal Court Awards Over $29M in Statutory Damages for Copyright Infringement

In August 2021, the FC issued its decision in Bell Canada v L3D Distributing Inc., 2021 FC 832, awarding over $29 million in statutory damages for copyright infringement.  In this case, Canadian broadcasters and distributors of broadcasts (the Plaintiffs) brought an action for copyright infringement against three businesses and an individual that advertised, offered for sale, and sold pre-loaded set-top boxes and internet protocol television services, which provided unauthorized access to the Plaintiffs’ content.  The FC applied the common law inducement test in the context of copyright infringement for the first time, stating that it saw no reason why the test should be restricted to any particular type of IP rights.  The FC awarded the Plaintiffs $10,000 per work ($29,300,000 in total) in statutory damages and punitive damages of $100,000 against each of the three defendants.  Our report on this decision can be found here.  

US Supreme Court Issues Landmark Copyright Decision in Favour of Google

In April 2021, the Supreme Court of the United States (SCOTUS) issued its decision in Google LLC v Oracle America, Inc., 593 US ___ (2021), ending the decade-long litigation dispute.  Oracle America, Inc. (Oracle) alleged that Google LLC’s (Google) copying of Oracle’s Java Application Programming Interface constituted copyright infringement and claimed damages in the amount of nearly $9 billion USD.  In a 6-2 majority, the SCOTUS held that Google’s actions did not amount to copyright infringement and constituted fair use.  Click here for our full report. 

6. Privacy

Alberta Recognizes New “Public Disclosure of Private Facts” Tort

In September 2021, the Court of Queen’s Bench of Alberta (the Court) in ES v Shillington, 2021 ABQB 739, recognized the “Public Disclosure of Private Facts” as a new tort in Alberta.  The Court relied on the three required elements established by the SCC in Nevsun Resources Ltd. v Araya, 2020 SCC 5, and held that in order to establish liability for the tort of Public Disclosure of Private Facts, the plaintiff must prove that (i) the defendant publicized an aspect of the plaintiff’s private life; (ii) the plaintiff did not consent to the publication; (iii) the matter publicized or its publication would be highly offensive to a reasonable person in the position of the plaintiff; and (iv) the publication was not of legitimate concern to the public.  Our report on this decision can be found here. 

Alberta now joins Ontario in recognizing the tort of Public Disclosure of Private Facts.  The Ontario Superior Court of Justice first recognized this tort in 2016, as previously reported in the E-TIPS® Newsletter here.

Google’s Search Engine Qualifies as Commercial Activity under PIPEDA

In July 2021, the FC in Reference re Subsection 18.3(1) of the Federal Courts Act, 2021 FC 723, found that Google’s search engine service operates in the course of commercial activities within the meaning of the Personal Information Protection and Electronic Documents Act (PIPEDA).  The FC further held that Google’s service did not fall under PIPEDA’s journalistic exemption.  Our full report on this decision can be found here.  

Cyber Security

Institutions and organizations of all levels faced cyber security concerns in 2021 as data breaches and cyberattacks continued to increase in frequency and sophistication.  Some notable developments included:

• In December 2021, Canadian federal ministers released an open letter to Canadians discussing the rise of ransomware attacks and offering guidance for organizations to curb this trend.  One of the resources referenced in the open letter is the Ransomware Playbook, published by the Canadian Centre for Cyber Security, to help organizations defend against and recover from ransomware attacks.
• In August 2021, the Office of the Superintendent of Financial Institutions (OSFI) issued an updated Technology and Cyber Security Incident Reporting Advisory applicable to federally regulated financial institutions (FRFIs).  The updated Advisory mandates stricter reporting requirements on FRFIs; requires FRFIs to report to OSFI any technology or cyber security incident within 24 hours, or sooner if possible; and introduces new consequences on FRFIs for failure to report.
• In November 2021, OSFI launched a public consultation on Draft Guideline B‑13: Technology and Cyber Risk Management.  The Draft Guideline applies to FRFIs and sets out OSFI’s expectations in relation to technology and cyber risks.
• In September 2021, the US Department of the Treasury’s Office of Foreign Assets Control issued an updated advisory to highlight the sanctions risks associated with ransomware payments to malicious cyber actors and proactive steps that companies can take to mitigate such risks.
• In March 2021, the Ontario Court of Appeal (ONCA) issued its decision in Family and Children’s Services of Lanark, Leeds and Grenville v Co-operators General Insurance Company, 2021 ONCA 159.  The ONCA found that an insurer had no duty to defend a children’s aid society nor its service provider in relation to a cyber hack.  The ONCA held that the parties’ claims were covered by the clear and unambiguous language of the exclusion clauses within the insurance policy. 

7. Legal Developments in Emerging Technology Around the World

The world’s IT law landscape continues to evolve in response to innovative technologies.  Many jurisdictions addressed legal issues surrounding IP and artificial intelligence (AI).  In addition, the increase in popularity and mass adoption of non-fungible tokens (NFTs) has brought on a myriad of legal considerations.  Some of the major stories included: 

• In April 2021, the European Commission released a highly anticipated proposal for a regulation laying down harmonised rules on AI, aimed to ensure the protection of the rights and safety of AI system users, as well as trust in the development and uptake of AI.
• In July 2021, the Federal Court of Australia and an administrative panel in South Africa released landmark decisions, recognizing that an AI machine, “DABUS”, can be an inventor in the context of patent applications.  However, in September 2021, the England and Wales Court of Appeal in a 2-1 majority held that “DABUS” cannot qualify as an inventor under UK patent law.  Similarly, a US Federal Court agreed with the United States Patent and Trademark Office’s interpretation that an “inventor” must be a natural person and held that “DABUS” cannot be an inventor under US patent law.  
• In March 2021, an NFT entitled “Everydays – The First 5000 Days” by digital artist Beeple was sold at an online auction held by Christie’s for a record-breaking $69.3 million USD.
• In November 2021, Miramax filed a lawsuit alleging breach of contract, copyright infringement, and trademark infringement against Quentin Tarantino for his planned auction of NFTs based on his hand-written script of the film Pulp Fiction.