Revisiting Some Key Legal Issues

As we begin 2002, it seems appropriate to take stock of some of the key legal issues of the past year. Several issues that have been discussed in this column are still with us, though they look a little different now.

Here’s a status report for CIOs who want to keep abreast of legal matters that may affect their operations.

Privacy Legislation

The federal privacy act has been in force for some time and the Privacy Commissioner and his office are up and running. The Commissioner has adopted an aggressive approach to both the interpretation and enforcement. Those who were hoping for a practical approach in commercial transactions are not encouraged. In the Commissioner’s view, privacy for personal information is a ‘civil right’. Inconvenience to business transaction and added costs for doing business will have to take a back seat.

Ontario is expected to soon release the first draft of its version of privacy legislation. A more even-handed approach by the provinces to the balance between an individual’s rights and the cost of doing business would of course be welcome, but there is a drawback. Unless the provinces and the federal government are made to realize the need for harmonious rules throughout Canada, we face the danger of ending up with a patchwork of different legislation and an even greater burden on businesses operating on a national basis.

Domain Names

The contest between trademark owners and domain name registrants continues. The ICANN-sponsored dispute resolution system is in full swing. It affords a relatively low-cost, online system to address allegations of bad-faith registration of domain names. Some commentators have noted that, based on statistics, some of the arbitrators are favouring trademark owners.

New high-level names such as ‘.biz’ are now available, with conflicting applications being dealt with through a lottery. This practice presents another setback for trademark owners. It must be disappointing if you have just finished buying up all of the domain name equivalents for your critical trademarks, to find that yet another equivalent has come into the hands of a stranger.

Unhappily, there is no easy answer to the inherent conflict between the trademark ownership system, which is based on national borders, and the borderless worldwide reach of the Internet.

Business Methods Patents

The U.S. Patent Office continues to issue patents on business methods even while the debate on the advisability of this development continues. Japan and most recently Australian courts have followed the U.S., where the courts have virtually amended patent law without legislative oversight.

For Canadian policy makers, the Australian experience should give rise to some concern. Australians’ initial enthusiasm for expansion of patentability was short lived, once it was realized that most claimants of business-

methods patents are non-Australians and that significant royalties flowing out of the country will burden local competitiveness.

In the meantime, the U.S. is pushing the World Intellectual Property Organization (WIPO) into wholesale changes to the Patent Co-operation Treaty, some say to make the Treaty more attractive to U.S. inventors.

Sales Tax on Software

In 1997, Ontario introduced 8% retail sales tax on most sales of computer software, including service charges for implementation work. I have already commented on the timing of the regulations and the unfortunate retroactive effect of the loss of certain exemptions that were widely believed to be available. Custom computer programs are exempt but only within a very narrow definition.

Audit staff of the Ministry of Finance have been very aggressive in reassessing purchasers of software systems, taking a very narrow view of the exemption for custom programs. In answer to the growing dissatisfaction among the ranks affected, the Ministry of Finance issued a press release in October announcing consultations with the industry and its advisors. No specific target has been

announced for the timing or the scope for any new or

corrective initiatives, but at least officials appear to be listening.

Gabe Takach is Head of Technology Contracting for the Toronto law firm Torys. He can be reached at