The manner of termination can greatly increase the employer's liability in the event it is unsuccessful in defending a wrongful dismissal suit.

In Rady v. Canadian Medical Laboratories Limited (Jan. 7, 1999, Ont. Gen Div), a laboratory technologist with a six-and-a-half year unblemished employment record with the employer was terminated for just cause. The employee denied the allegations.

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The court ultimately found that there was no just cause, and determined that the appropriate period of reasonable notice was six months compensation plus benefits, in all of the circumstances. However, the court went on to consider the Supreme Court of Canada decision of Wallace v. United Grain Growers Ltd. and the argument that there had been "bad faith conduct" by the employer at the time of the termination.

The Court doubled the notice period on the basis of the Wallace principles and observed that:

"...one is taken by the haste with which [the investigator] acted. Here is an employee who had a blemish-free record, over six-and-a-half years’ employment with the defendant. No concerns had been raised before about his competence and diligence. In fact, he had been trusted with the training of others with respect to [kidney] stone analysis. A serious accusation is made about the plaintiff which seems to be totally out of character, and the accusation is made by a co-worker who had his own personal reasons for maligning the plaintiff.

A hurried and imperfect investigation on samples retrieved from the garbage is carried out. It is quite possible that [the investigator], who did not appreciate what was involved in the testing, may have simply misunderstood the plaintiff's brief explanation at the meeting. Yet, [the investigator], who does not usually engage in the hiring and firing of personnel, decided to forego the defendant's usual policy of issuing warning memos to employees and just terminated the plaintiff's employment based on the information that she had. In the circumstances, I find that she acted precipitously. If she had doubts about the plaintiff's methods, she should have at least consulted the plaintiff's immediate supervisor and carried out a more thorough investigation, particularly when the evidence that she had concerning the plaintiff was suspect. A longstanding employee with flawless record deserved better.

Therefore, I must conclude that the defendant has not established cause for dismissal. Concerns about potential misconduct do not suffice. Therefore, the plaintiff is entitled to reasonable notice upon dismissal."

The bad faith that engaged the Wallace principles came in two forms:

“First, in the face of an allegation, which if true, would seriously affect the plaintiff's reputation and prospects of re-employment, the defendant failed to conduct a proper investigation before concluding that the allegation had been substantiated and dismissing him. Secondly, the defendant, in its statement of defence, alleges that the plaintiff's results were questioned by various doctors who were clients of the defendant.

This is, of course, a very serious allegation. It was false. It was made without any basis whatsoever and was only withdrawn after discovery. The harm to the plaintiff has been significant. It has now been one and a half years since his dismissal, and despite making a diligent search, he has been unable to find equivalent employment and has been unable to resume his laboratory career. With no reference or explanation for his dismissal after years of service at the defendant, it is little wonder that his job search has been unsuccessful."

As noted above, of further concern to the court was that neither of the individuals involved in the investigation had any kidney stone analysis experience, nor were they the best persons to evaluate the correctness of the procedures followed by the plaintiff. The plaintiff's supervisor, who was directly responsible for the plaintiff's work, was the best person to perform this analysis, but was not consulted or called as a witness at the trial. In addition, one of the investigators may not have "been completely objective towards the plaintiff" because, a few days before the investigator raised questions about the plaintiff's procedures, the plaintiff had lodged a formal complaint against the investigator with the employer.

The Rady case illustrates that the investigation carried out by the employer will come under critical assessment where an employee is terminated for just cause. Careful consideration ought to be given to “who” the investigator will be and whether that person is the most appropriate individual. A related question is whether the investigator can carry out the investigation in a manner that is both credible and objectively defensible if challenged. As can be seen from Rady, a hasty investigation, conducted by persons who are not best positioned to carry it out, will not be lost on the court when assessing the damages suffered by the terminated employee. The lesson is that a “go slow” approach is often called for when a termination for just cause is the possible outcome.

Michael Fitzgibbon is a partner at the national law firm of Borden Ladner Gervais LLP, where he practices management-side labour and employment law. He runs the labour law blog Thoughts from a Management Lawyer.

The provisions of Québec’s Code of Civil Procedure (C.C.P.) governing the exercise of class actions in Québec were amended in 2003 to significantly modify the framework for the authorization of these actions in several important respects.

The requirement that the motion to authorize the class action be supported by an affidavit has been removed in this legislation, with the consequence that defendants may have lost the right to conduct examinations on discovery before the hearing on authorization to validate the allegations of the motion. In addition, the amendments also took away the right of defendants to file a written contestation to the motion for authorization. These contestations were usually supported by affidavits to present evidence. Finally, the new article, 1002 C.C.P., did away with the right of a defendant to otherwise produce evidence at the hearing on the authorization, except with the permission of the court.

In an ambitious challenge to these amendments, a pharmaceutical company targeted by a class action sought a declaration that article 1002 C.C.P. violated section 23 of the Québec Charter of Human Rights and Freedoms, and, as such, rendered inoperative the entire class action regime in Québec. However, the challenge was unsuccessful. After close to two years of litigation, the Court of Appeal recently rendered a unanimous landmark decision concluding that all the limitations to the presentation of evidence surrounding the motion to authorize a class action were constitutionally valid (Pharmascience Inc. v. Options consommateurs et al., 500-09-014659-049, April 29, 2005 – hereinafter referred to as Piro).

In its conclusions, the court stated that the class action regime embodies a social policy promoting access to justice, by creating a context in which the respective forces of the parties are kept in balance. As such, the authorization process should be viewed as a filtering mechanism to eliminate futile actions, not as a forum for deciding on the appropriateness of the action. In so concluding, the court relied on a statement in one of its recent decisions where leave to appeal to the Supreme Court was denied (New York Life v. Vaughn, [2003] J.Q. 89 (C.A.)). In that case, the Court of Appeal had confirmed the constitutional validity of article 1010 C.C.P., which denies the right to appeal a decision authorizing a class action.

Moreover, the court confirmed prior case law stating that the action itself does not exist before authorization has been granted (which is contrary to the position taken by courts in other provinces). As a result, the court found that the right to a full and impartial hearing, which applies to all actions, is not applicable on the motion for authorization.

The pharmaceutical company in this case also argued that the Superior Court had no jurisdiction over the subject matter because it involved a factual element, the determination of which was specifically attributed to the Health Minister. The Court of Appeal disagreed with that argument. While agreeing that the evidence to prove the allegations found in the motion would be rather difficult to adduce, it pointed out that assessing the potential risks and pitfalls of the future action did not fall within the scope of issues relevant to the judge at the authorization stage.

Only time will tell how this apparently strict reading of article 1002 C.C.P. will affect the class action regime in Québec. However, there are concerns that it may spawn an era in which authorization of class actions becomes significantly easier to obtain in Québec. This is particularly the case now that the Supreme Court of Canada has refused leave to appeal the Piro decision (Pharmascience Inc. v. Option Consommateurs et al. (August 25, 2005), SCC 30922).

In the wake of the Court of Appeal’s decision, much is left to be determined as to how, practically speaking, class action authorization hearings will proceed. Some decisions have already indicated that the responding party cannot seek a preliminary authorization to present evidence (Marcotte v. Banque Nationale, S.C. Montréal, 500-06-000197-034, August 27, 2003, Tessier J.) and that such a request must be presented on the day of the hearing of the motion for authorization. That approach leaves the defendant to decide whether it wishes to gather and prepare evidence which might, at the hearing, be refused by the court.

Moreover, the Piro decision stated that the court must evaluate the validity of the permitted arguments on the basis of the facts as alleged in the motion for authorization, which are accepted as though proven. This obviously opens a debate concerning the types of evidence that should be permitted by courts within those parameters. The defence of class actions in Québec in future will require a great deal of creativity on the part of defence lawyers.

Julie Chenette is a partner in McCarthy Tétrault's Montreal office. She specializes in commercial, civil and class action litigation matters, as well as various cases before administrative tribunals. This article originally appeared in First in Class, published by McCarthy Tétrault's Class Action Litigation Group.

The Tax Court of Canada affirmed in a landmark decision, Canada Trustco Mortgage Company v. The Queen (Docket 2003-3554(GST)G (released Dec. 17, 2004), that supplies of services made by Canada Trustco Mortgage Company to three special purpose trusts (SPVs) to administer mortgages sold to the SPVs are exempt from GST. The decision may be useful to support rebate claims for SPVs that have been paying GST (in error) on servicing fees in similar securitization arrangements.

Canada Trustco sold portfolios of residential mortgages as part of a securitization arrangement to three SPVs on a fully serviced basis (i.e., no separate servicing fee was expressed in the purchase documents to be payable by the SPVs to Canada Trustco). The Minister of National Revenue assessed the SPVs for failing to pay GST (plus penalties and interest) on the consideration that the minister determined GST was charged by Canada Trustco for the servicing of the mortgages.

Associate Chief Justice Bowman relied heavily on O.A. Brown Ltd. v. Canada [1995] G.S.T.C. 40 to conclude that the servicing fees at issue were part of a single composite supply of a financial service (i.e., sale of residential mortgages). The Associate Chief Justice concluded that:

for the principle in O. A. Brown to apply, there must be an inextricable interdependency between the two elements, so that they are integral parts of a composite whole that cannot, as a matter of commercial reality, be sensibly separated into separate supplies. [para. 20]

Associate Chief Justice Bowman further held that:

Whether these criteria are met depends upon a number of factual considerations, and these will vary from case to case. Here we have a sale of mortgages of which the servicing is not only an integral part, but is requisite as a matter of commercial exigency. There is an intimate commercial relationship between CTM and the trusts, in which CTM not only holds the registered title to the mortgages in trust for the trusts, but also performs the very services which are essential to the commercial viability of the trusts’ investment. For someone other than CTM to service the mortgages would, as a practical matter, be commercially infeasible, and would be inimical to the raison d’être of the transaction. [para 20]

Associate Chief Justice Bowman’s conclusion in this regard was, in itself, sufficient to dispose of the case. However, the court went on to consider the alternative arguments raised by Canada Trustco with respect to ss. 138 and 139 of the Excise Tax Act (ETA).

As a threshold matter, ss. 138 and 139 can only apply where there is a single consideration. Associate Chief Justice Bowman found this threshold condition was met in this case, because the agreements between the parties evidenced that the mortgages were sold to the SPVs on a fully serviced basis (i.e., the consideration for the servicing was not set out in the agreements with the SPVs as a separate identifiable fee. Sections 138 and 139 of the ETA would, therefore, not be available for securitzations that involve discrete and separate fees for servicing).

Associate Chief Justice Bowman rejected the minister's contention that entries in the financial statements of CTM established that there was a separate consideration for the servicing equal to 25 basis points on the face amount of the mortgages. The court pointed out that the 25 basis points were based on guidelines issued by the Office of the Superintendent of Financial Institutions with respect to NHA-insured mortgage-backed securities. [para 28]

On this point, Associate Chief Justice Bowman reiterated that:

It has often been observed that accounting entries do not create reality, but they should reflect it. The notes to the financial statements and the recording of an amount in account 3150 of the books of CTM neither create nor reflect reality. The substance of the transaction is contained in the agreement between the parties [para 29].

Associate Chief Justice Bowman observed that the 25 basis points on which the minister was levying GST was, in any event, “only a small portion of the difference between the net book value of the mortgages sold to the trust and the amount ultimately received by CTM.” [para 30] The supply of the servicing would, therefore, be incidental to the sale of mortgages, pursuant to s. 138 of the ETA, if the two components were found to be separate supplies.

In dealing with the further alternative argument, Associate Chief Justice Bowman concluded that s. 139 of the ETA would also apply to deem the servicing an exempt financial service because “the consideration for the financial services (the sale of the mortgages) if they were supplied separately, is obviously greater than 50 per cent of the total.” [para 33] The court also found that it was in the ordinary course of Canada Trustco’s business to supply such services.

Commentary

The decision effectively overrules a number of interpretations and rulings previously issued by the Canada Revenue Agency (CRA) suggesting that servicing fees in most securitization arrangements would be subject to GST. The CRA generally took the position that where mortgages were sold on a fully serviced basis, the servicing and the sale of the mortgages would not constitute a single exempt supply.

The CRA was also of the view that ss. 138 and 139 of the ETA would generally not be available to exempt the supply of the servicing, because most securitization agreements contemplate a separate fee for servicing “which is clearly distinguishable from the purchase price of sold mortgages [para 33].” This, the CRA noted, is because servicing fees were often recognized as a separate source of revenue in the service provider’s financial statements, books, and records in accordance with generally accepted accounting principles (or for regulatory reasons). The CRA’s position in this regard was soundly rejected by Associate Chief Justice Bowman.

The minister has chosen not to appeal the decision. However, the Department of Finance always has the option of amending the ETA retroactively to nullify the impact of the decision. Finance has used this option in previous instances, rather than risk an unfavourable decision on appeal.

For the time being, SPVs that have been paying GST on servicing fees in similar securitization arrangements should consider whether the decision supports a rebate claim on the basis that such GST was paid in error. These rebate claims should be filed as soon as possible, given the two-year limitation period on rebate claims set out in s. 261 of the ETA.

In order to minimize future GST, all securitization arrangements should provide for the sale of the financial instruments to SPVs on a fully serviced basis.

Taxpayers will welcome the fact the decision puts to rest what has been a long-simmering controversy regarding the tax treatment of servicing income in the context of securitizations of financial instruments.

Allan Gelkopf practises in the Commodity Tax & Customs Group in Blake, Cassels & Graydon's Toronto office, where he is a partner. He is also a member of the firm's E-commerce Group. Robert Kreklewich is an associate who practises in the Commodity Tax & Customs Group in the Toronto office.

A version of this article previously appeared in the GST & Commodity Tax Newsletter January/February 2005 (Thomson Canada Limited).

In these challenging times, the substantive right of solicitor-client privilege is itself being threatened. The need for the in-house lawyer’s client to be able to make complete disclosure in order for counsel to represent them properly is essential. Lawyers are the stewards of privilege – a right that belongs not to us, but to our clients.

In-house counsel enjoy (and are burdened by) the same professional privileges and obligations as a lawyer in the private bar. Being a salaried employee does not prevent the formation of a solicitor-client relationship. Also, there is almost no distinction between corporate counsel and governmental legal counsel (although government lawyers may have some other statutory considerations arising out of Freedom of Information legislation, etc.). A lawyer is a lawyer is a lawyer. In the organizational setting –that is, in corporations, not-for-profit organizations, and governmental departments – there are additional complexities. Privilege is not absolute, and the role of in-house counsel and how they conduct their affairs may affect the entitlement to privilege. The attachment of privilege depends on the nature of the relationship, the subject matter of the advice, and the circumstances in which that legal advice is sought and rendered.

Many in-house counsel wear many hats in the performance of their duties for their organization. In my own case, my senior management duties were the genesis of my interest and concerns regarding privilege, especially in the corporate setting. Privilege does not extend automatically just because you are a lawyer, and it especially does not attach to business matters, even though they may be part of your job. Today, in-house counsel are involved in compliance matters, environmental issues, governmental and public affairs – and even strategic business issues.

In R. v. Campbell [1991 1 SCR], Justice Binnie made note of the special problems that arise out of the corporate context. There are three main areas where problems with privilege or its implied existence may arise:

• is the matter at hand a legal one, and, as such, does it fall under privilege;
• what is the organizational structure of the corporation: how are legal services are obtained internally, and how does information flow within the organization; these may nullify claims of privilege; and
• finally, who is the client, and thus who is deserving of the protection privilege offers?

Due to the complex structures of organizations, the representative who contacts legal counsel, and the method in which this contact is made, may create a lack of “formality” that is a contributor in determining who is entitled to the protection of privilege.

Privilege is determined on a case-by-case basis. From a practical point of view, I would like to list a few principles that in-house counsel may employ to create (and preserve) privilege. Because every organization is different, and every situation is unique, this may not be a complete list, but still will be a useful reference.

• Role of in-house counsel - Be clear that you are acting as a lawyer and not in any other capacity, especially an operational one. Close to the beginning of the communication or notice of a matter, clarify your role. Be sure to communicate with the right personnel to ensure they understand the issues surrounding privilege. Use documentation that supports this notion. For example, note that this is a legal file and that the file is deposited with other legal matters, rather than operational ones. Use letterhead that shows you are acting as legal counsel, etc. Use outside counsel if you have concerns about the ability to separate your roles.
• Corporate policies - Organizational systems should ensure that communications to counsel are in writing and for the purposes of obtaining legal advice. A referral methodology with a written request is a good initiative. Communicate the importance of marking files as confidential and privileged, and separate them from operational files. Ensure that the “legal department” is the body responsible for matters that have legal implications.
• Communications – Ensure communications demonstrate the use and application of legal skill and advice. Mark documents as “privileged,” “confidential,” or “prepared at the request of legal counsel for the purposes of providing legal advice.” Once an issue has been raised, confirm in writing that legal advice has been requested.
• Office procedures – File separation is critical. Ensure that information and files are marked and separated especially from those relating to management, operational, or non-legal matters. In legal files, try to include only information that has relevance to the legal matter and that support the position that counsel has gathered this information for the purposes of exercising their legal knowledge and skill. In short, do not taint the “quality” of privileged information with other non-legally relevant matters and data.
• Avoid waiver of privilege – Restrict circulation of confidential and privileged documents. Limit communications with third parties, and be mindful of those who may not reasonably be characterized as an employee or agent of the organization. Be aware of disclosures made for regulatory purposes or those seized in investigations, and clearly assert your rights as early as possible. The same must be said about matters involved in litigation, including reference to privileged documents in discoveries, etc.
• Protecting against the denial of privilege – ensure that actions in the organization do not lose privilege because they were not kept confidential. In short, they should have very restricted use, distribution, and limited access. Protect your organizations from unauthorized or inadvertent communications to third parties. Also, be aware of the pitfall of losing privilege on the grounds that communications were not made for the "dominant purpose of preparing for existing or expected litigation." Again, identify the purpose of gathering information, including data from interviews. Information collected for litigation must differ that gathered for operational purposes (including internal reports). Avoid including information obtained for other organizational purposes in investigative reports that may potentially be used for litigation purposes.

Read the full text of Robert Patzelt's article on solicitor-client privilege in PDF format.

Robert Patzelt is President of the Canadian Corporate Counsel Association and general counsel and group risk manager for Scotia Investments Ltd. The views expressed in this article are entirely personal.

Since 1918, the Uniform Law Conference of Canada (ULCC) has been making significant, although perhaps insufficiently heralded, contributions to the development of the Canadian commercial law infrastructure. Founded at the suggestion of the Canadian Bar Association, the ULCC is modelled after the National Conference of Commissions on Uniform State Laws (NCCUSL) in the U.S. , the co-sponsor of the famous Uniform Commercial Code (UCC). Similar to the NCCUSL’s raison d’être, the original purpose of the ULCC was to harmonize the laws of the provinces and territories of Canada and, where appropriate, federal laws. Harmonization of commercial law facilitates our economic union, lowers internal barriers to trade, and enables parties to more reliably develop for themselves, and expect to encounter, common business practices across the country than would otherwise exist.

Today, in addition to carrying out its original mandate, the ULCC also makes recommendations for changes to federal criminal law legislation based on identified deficiencies, defects, gaps or judicial interpretations. With the abolition, in most provinces, of law reform commissions, the ULCC has also filled that gap and become one of the primary organs for law reform within the country.

Currently, the ULCC is divided into two sections: Criminal and Civil. The Civil Section assembles government policy lawyers, analysts, private sector lawyers and law reformers to consider areas in which provincial and territorial laws would benefit from harmonization. The Criminal Section unites prosecutors from federal, provincial and territorial governments, with defence counsel and judges, to consider proposals to amend criminal laws, even though these fall primarily under federal jurisdiction.

A wide variety of civil legislative enactments have resulted from the historical work of the ULCC. For commercial law practitioners, perhaps the most significant ULCC uniformity project to date has been the Uniform Personal Property Security Act (Article 9 of the UCC), which has contributed to the substantial convergence in chattel security law in the common law provinces and territories that has taken place in the last 15 years. Other ULCC legislative initiatives particularly relevant to commercial law practitioners include: domestic arbitration, class proceedings, cost of credit disclosures, electronic commerce, foreign money claims, frustrated contracts, and provincial legislation needed for the implementation of international conventions to which Canada is a party, such as treaties on international commercial arbitration, international receivables, international sale of goods, judgment enforcement, and mobile goods.

As well, the ULCC, along with the Canadian Securities Administrators, is co-sponsor of the Uniform Securities Transfer Act (USTA). As previously written in the CBA National Business Section Newsletter, the Ontario Legislature is poised to introduce the USTA, along with companion amendments to its Personal Property Security Act (OPPSA) and Business Corporations Act (OBCA). The Ontario cabinet is expected to have approved the USTA and the companion amendments to the OPPSA and the OBCA by the time this article is posted. Most, if not all, of the other provinces and territories are expected to enact the USTA concurrently or in rapid succession.

The USTA is closely modelled on Revised Article 8 of the UCC, and represents the culmination of more than a decade of painstaking work by a dedicated group of leading scholars, practitioners, and legislative counsel across the country. Enactment of the USTA in all 13 provinces and territories will mark a degree of near word-for-word uniformity unprecedented in our history.

Currently, the ULCC Civil Section is continuing work on its Commercial Law Strategy. Some of the elements of the Commercial Law Strategy presented at the ULCC’s 2005 annual conference include: forms of business associations in Canada (the ULCC engaged this author and Professor Raymonde Crête of Laval University on the forms of business associations in Canada project), the Uniform Franchises Act, inter-jurisdictional class actions, Uniform Limitations Act, Uniform Charitable Fundraising Act, Uniform Trade Secrets Act, uniform enforcement of Canadian judgments and decrees, PPSA amendments, Assignments Convention implementation, and Hague Securities Convention implementation. The Hague Securities Convention sets out conflict of laws rules on securities transfers and, therefore, complements the USTA.

The ULCC operates on minimal financial resources and, by choice, operates independently of any private sector funding. Government lawyers and policy analysts form the backbone of the ULCC. Since its inception, the ULCC has also relied heavily on volunteers, many of whom are members of the CBA. For the past eight years, Jennifer Babe, a partner at Miller Thomson LLP, has been the CBA representative at the ULCC. Babe is the immediate past chair of the ULCC’s Commercial Law Strategy.

As can be seen this short description, the ULCC, despite its limited resources and extensive reliance on volunteers, has produced, and will continue to produce, a substantial body of work that, among other things, enhances the practice of commercial law and thereby fosters the country’s prosperity.

To learn more about the ULCC, visit its website at www.ulcc.ca.

Wayne Gray is a corporate-commercial partner at McMillan Binch LLP Toronto. He is Chair of the Ontario Bar Association's Corporate Law Subcommittee. The views expressed herein are entirely personal.

Bar Association speaks out against proposed changes to Competition Act

Don’t undercut the Competition Bureau’s work – and don’t make hasty changes to the Competition Act without considering the far-reaching consequences, the Canadian Bar Association warned the Standing Committee on Industry in November.

The Ministry of Industry unveiled proposed changes to the Competition Act in November 2004 with the first reading of Bill C-19. Additional amendments to the Bill were proposed at the end of October 2005. The additional changes were driven by the Liberal government’s energy relief package, and attempted to respond to allegations of pricing irregularities in the oil and gas industries that saw sharp spikes for consumers at the gas pumps and in their home heating bills.

The legislation would have established an Office of Petroleum Price Information (OPPI), responsible for monitoring the industry, increased the fines for those convicted of price-fixing to $25 million from $10 million, and provided the Competition Bureau with the ability to assess the state of competition in particular sectors of the economy.

But the changes, in contrast to previous changes to the Act, were rushed through quickly, the CBA said, and could result in undesirable effects.

“The Competition Act is a key legal underpinning of Canada’s economy, and the product of extensive analysis and deliberation,” National Competition Law Section Chair Madeleine Renaud wrote to the Committee in late November. “In contrast to the careful approach taken in respect of prior amendments to the Act, the proposed amendments to Bill C-19 are not supported by cogent evidence or analysis.”

The consultation process for changes to the Act began in 2002, with the government’s release of a report titled A Plan to Modernize Canada's Competition Regime. Public consultations on the proposed changes began in 2003, and after the release of a final report in April 2004, the government held another round of consultations with stakeholders. The CBA presented a submission on the initial changes in November 2004. In contrast, the timeline from the release of the proposed changes to the potential date of passage was about two months.

“If enacted, the proposed amendments will fundamentally alter the Act. As a result, the CBA Section is of the view that the proposed amendments to Bill C-19 are not appropriate,” Renaud said.

The Section’s letter also singled out the introduction of proposed market reference powers for the Commissioner of Competition as unnecessary.

“The recent report by the Commissioner of Competition provides no concrete evidence that such a power would actually lead to any improvement in Canada’s economy,” Renaud said. “Market reference are likely to impose an unnecessary burden on Canadian businesses and Canadian taxpayers, and provide a diversion when issues arise that have political sensitivity.”

Renaud finished the CBA’s submission to the Committee by calling for a rejection of the proposed amendments, and more time for any future reform proposals.

“The CBA Section generally cautions against the hurried adoption of reform proposals, the full implications of which cannot adequately be appreciated until carefully studied in a timeframe conducive to meaningful evaluation and consultation,” she said. “We urge the Industry Committee to reject the proposed amendments to Bill C-19, pending proper consultation.”

While the proposed amendments died on the order paper with the collapse of the Liberal minority government, they could be resurrected in the 39th Parliament following the federal election in January 2006.

Annual Competition Law Conference again a success

The CBA's National Competition Law Section held its Annual Fall Conference on Competition Law Nov. 3-4 at the Hilton Lac Leamy in Gatineau, QC. You can view a photo gallery from the event, and read the text of Comissioner of Competition Sheridan Scott's update on the Competition Bureau's progress and priorities, as well as her opening remarks for the Comissioner's Panel, which included leaders of the U.S. and Mexican Competition Commissions.

Jared Adams is the editor of Addendum.

On Feb. 1, 2006, s. 78.6 of the Patent Act will come into force, which could have an immediate impact on patents held by your clients.

The changes to the Act are as a result of the decision in Dutch Industries Ltd. v. Canada (Commissioner of Patents) ( C.A.) [2003] 4 F.C. 67, concerning whether or not a patent application had become irrevocably abandoned because insufficient fees were paid.

The Patent Act and Patent Rules require that patent holders/applicants pay fees, including annual maintenance fees, in order for their patents and applications to remain valid for the duration of their 20-year term of protection. The fees paid by patent holders/applicants vary according to the entity size — large or small. Small entity provisions, introduced in 1985, were intended to encourage small businesses (50 or fewer employees) and universities to use the patent system.

In 2003, with the Dutch Industries case, the Federal Court of Appeal ruled that entity size is determined once: when the patent application process is first engaged. For example, if a company initially files as a large entity, it is required to pay large entity fees throughout the life of the patent regardless of any subsequent changes in the entity size of the company. The court's decision did not support the prior common understanding that, as the entity changed size, so would the required fee.

The decision also eliminated a common practice of the Canadian Intellectual Property Office (CIPO), which had allowed patent holders/applicants to pay the difference in fees when their entity size changed from small to large.

As a result of the changes to the legislation, if your client previously paid the small entity fees when it, in fact, qualified as a large entity, they may now run the risk of losing patent rights as a result of having underpaid their fees. CIPO originally estimated that as many as 7,000 patent holders could be affected by the changes.

(The changes to the legislation came after extensive public consultation. The Canadian Bar Association’s Intellectual Property Law Section submitted comments on the proposed changes in May 2004.)

Starting Feb. 1, if the fees were previously underpaid, your client will have a 12-month window in which to correct the imbalance and maintain the intellectual property rights. It is the patent-holder’s responsibility to ensure that it paid the proper fee.

If you have any doubts as to whether or not the proper fee was paid, CIPO recently made payment history available online though the Canadian patents database.

It’s also important to note that CIPO has advised there will be no extensions to the 12-month timeframe to make corrections.

Jared Adams is the editor of Addendum.