Technology Law Quarterly Volume 3, Issue 3

Co-Counsel Technology LawQuarterly McCarthy TétraultCo-Counsel: July –September2007 Volume 3,Issue3 Co-Counsel: Technology Law Quarterly Volume 3, Issue 3

Welcome to Volume 3, Issue 3 of McCarthy Tétrault Co-Counsel: Technology Law Quarterly. In this issue of the TLQ, we highlight a recent Supreme Court of Canada decision on the enforceability of mandatory arbitration clauses in consumer contracts, including in online terms and conditions. Businesses that sell or make goods and services available to consumers in Canada, including over the Internet, and particularly Ontario and Québec, will want to read this article. On the software licensing front, we begin a four-part series on the Open Source Initiative, licensing models of intellectual property and the copyleft regime under the GNU General Public License. On the intellectual property side, our copyright lawyers analyze the important Supreme Court of Canada Euro-Excellence v. Kraft Canada case.

Privacy continues to be a hot topic, and we’ve included two interesting pieces in the area. The first discusses the recently released privacy breach guidelines. The Privacy Commissioner of Canada has prepared guidelines on how organizations subject to PIPEDA should respond to privacy breaches. Our privacy experts address the four key steps to consider when responding to a breach or suspected breach, including the contentious notification provision. The second article speaks to the OECD recommendation on cross-border privacy enforcement, which updates the OECD’s guidelines on privacy and trans-border data flows. Our lawyers examine the Canada-specific concerns and provide their insight on the key points of the recommendation.

Lawyers from our communications practice group continue our four-part discussion on regulatory matters affecting VoIP technology with a detailed overview of issues encountered in developing country markets, particularly where voice telephone service competition is limited. In addition, this issue of the TLQ adds a new four-part series on the effect of new technologies on Canadian cultural media products, with particular emphasis on smaller Canadian titles. With audiences becoming more and more fragmented among the variety of media choices and platforms, and the growing availability of on-demand programming, the question is, “What happens to smaller Canadian content productions?”

Continuing with our new venture of providing clients with valuable knowledge on clean technology initiatives, we’ve included three engaging articles. The first deals with how important clean technology has and continues to become, due in many ways to the increased urbanization of the world’s population. Investment in clean technology is expected to skyrocket and Canadian businesses and organizations can play an important role in creating public policy. They can also participate in and collaborate on efforts to implement clean tech initiatives. The second article deals with a very important trend in clean tech: the impact of climate change. Leading US and European institutional investors have filed a petition with the Securities and Exchange Commission to force publicly traded

companies to disclose their financial risks from climate change. In addition, the Canadian Council of CEOs has released a declaration asking the government to engage with businesses to shape public policy with the goal of increasing clean tech opportunities.

These and many other key topics are discussed in this issue of the TLQ. Browse through the publication using the table of contents, which contains ‘clickable’ links to articles. As well, all the articles can be found on our website. You can search our publications database and find additional informative articles on many subjects. If you would prefer to receive a paper copy of the TLQ in the future or wish to change your subscription information, please contact me at the link below.

For readers interested in litigation issues, we are pleased to announce the launch of McCarthy Tétrault Co-Counsel: Litigation, which has been created to provide a picture of developments in litigation and, most importantly, the implications for your organization.

McCarthy Tétrault is proud of its position as a leader in all areas of law. The Canadian Legal Lexpert Directory 2007 has recognized McCarthy Tétrault for having the premier technology law practice in the country. The Chambers Global: Guide to the World’s Top Lawyers 2007 has confirmed McCarthy’s top ranking in Canada for technology, media and telecom (TMT). Co-Counsel: Technology Law Quarterly is one more way we are working hard to retain that position of leadership.

Heather J. Ritchie Editor-in-chief October 2007

Co-Counsel: Technology Law Quarterly Volume 3, Issue 3

Table of Contents

Internet/E-World ...... 1

E-COMMERCE ...... 1 Québec: Arbitration Clauses, Consumer Contracts and Class Proceeding: The Canadian Approach ...... 1

SOFTWARE LICENSING ...... 3 International: Open Source Software and Open Content Licensing: From Copyright to Copyleft — Part I...... 3

DOMAIN NAMES ...... 8 Canada: CIRA Panel Transfers Protest Site to Targeted Company...... 8

Technology Finance ...... 11

TECH-RELATED FINANCE ...... 11 North America: Taking Your Tech Company Public ...... 11

Intellectual Property ...... 15

Privacy ...... 17

CASES/LEGAL DEVELOPMENTS ...... 17 Canada: Privacy Commissioner of Canada Releases Privacy Breach Guidelines ...... 17 International: OECD Issues Recommendation on Cross-Border Privacy Enforcement...... 19

Co-Counsel: Technology Law Quarterly Volume 3, Issue 3

Communications ...... 23

CASES/LEGAL DEVELOPMENTS ...... 23 International: Voice over IP Services — Regulatory Perspectives from the Developed and Developing Worlds — Part III ...... 23 Canada: Canadian Cultural Product and the Long Tail: The New Economics of Production and Distribution in Canada — Part I ...... 27

Clean Technology ...... 33

CASES/LEGAL DEVELOPMENTS ...... 33 Canada: Another Big New Tech Wave ...... 33 US: 1.5 Trillion Reasons Why Climate Change Impacts Are Material Disclosure ...... 36 Canada: Canadian CEO Council Consensus: Climate Change Is Top Issue...... 39

Co-Counsel: Technology Law Quarterly Volume 3, Issue 3

Internet/E-World

E-COMMERCE circumvented by bringing an action in the form of a class action. Québec: Arbitration Clauses, Consumer While the judgment was based on Contracts and Class Proceeding: Québec law, the principles adopted by the The Canadian Approach Supreme Court of Canada should be equally applicable to class actions in all provinces The limited Canadian case law dealing with the with class action legislation, as well as to enforceability of mandatory arbitration clauses class actions in the Federal Court. Each of in consumer contracts has been inconsistent, these jurisdictions has legislation that, with with courts in Ontario, British Columbia and very limited exceptions, requires a court Québec reaching somewhat different to grant a stay of an action if the claim is conclusions. For potential litigants, these subject to an arbitration clause and the decisions created a state of uncertainty defendant promptly requests that the regarding what recourse could be available if action be stayed in favour of arbitration. a dispute arises from a consumer contract that contains an arbitration clause. One of the chief A number of non-Québec decisions were avenues of recourse is a class proceeding. rendered before the Supreme Court of McCarthy Tétrault Notes: Canada’s decisions in Dell and Rogers in which courts held, in effect, that a class This uncertainty was addressed by the action trumped an arbitration clause. On Supreme Court of Canada on Friday, July the basis of Dell and Rogers, these cases 13, 2007, an unlucky day for the plaintiffs now appear to have been wrongly decided. in two Québec class actions: Dell Computer Corp. v. Union des consommateurs and Importantly, before Dell and Rogers were Rogers Wireless Inc. v. Muroff. It may also decided, two provinces — Ontario and have been a red-letter day for some class Québec — opted to settle the arbitration action defendants in Canada. clause class action issue through legislation. Both prohibit or invalidate On that day, the Supreme Court of Canada pre-dispute arbitration clauses that held that Québec courts must stay a class prevent consumers from seeking recourse action if the plaintiff’s claim is subject before the ordinary courts. to an arbitration clause included in an agreement. The court affirmed that, In Québec, the legislature adopted Bill 48, in general, arbitration clauses cannot be which reverses both the Court of Appeal and the Supreme Court of Canada in Dell on the

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 issue of pre-dispute arbitration clauses. The Dell and Rogers cases have brought The bill, which amended Québec’s significant certainty to this area. Consumer Protection Act, came into force on December 14, 2006. As a result The result of the Ontario and Québec of the amendments, no pre-dispute legislation is to deny those advantages, arbitration clause agreed to after that date in most circumstances, to sellers who will be upheld if it prohibits a class action or enter into contracts with consumers in otherwise waives or restricts the consumer’s those two jurisdictions. In Québec, some right to go to court. Since these provisions industries are exempted from these rules — were adopted after the commencement of notably those in the insurance, gas and the class action claims in Dell and Rogers, electricity, funeral, tradable securities the court held that the legislative provisions and real estate sectors. These industries did not apply in those cases. are instead regulated by sector-specific rules. In addition, the legislation in both Similarly, the Ontario legislature amended jurisdictions expressly permits the parties that province’s Consumer Protection Act to to pursue arbitration if the agreement to invalidate pre-dispute arbitration clauses do so is concluded after the dispute arises. precluding consumers from pursuing remedies before the courts. The new Businesses selling or otherwise making provisions also specifically overrule goods or services available to customers contractual provisions entered into after in Ontario and Québec should review their the amendments were passed, if they standard customer agreements to ensure prevent consumers from starting or they are not relying on the ability to oust participating in a class action. These courts in favour of arbitration when a rules came into force in July 2005. customer dispute arises.

In other jurisdictions, an arbitration clause, Contact: even in a consumer contract, should enable Charles S. Morgan in Montréal at a class action defendant to have a class [email protected] action stayed if it is brought in violation or of an arbitration clause. Donald Bisson in Montréal at [email protected] For merchants, knowing that contractual or disputes will follow a uniform arbitration John P. Brown in Toronto at process has many advantages, such as [email protected] reduced jurisdictional uncertainties, or reduced litigation costs and resolution Eric Gertner in Toronto at of disagreements through an impartial [email protected] adjudicator instead of in the media. or

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Wendy Gross in Toronto at SOFTWARE LICENSING [email protected] or International: Catherine M. Samuel in Calgary at Open Source Software and Open Content Licensing: From Copyright [email protected] to Copyleft — Part I or Cappone D’Angelo in Vancouver at This article begins a four-part series focusing [email protected] on the open source initiative, licensing models of intellectual property, the copyleft regime under the GNU General Public License (GPL), challenges pertaining to the governing law, safe harbour provisions and other practical legal concerns with the GNU GPL, including some thoughts on the just-released 3.0 version.

McCarthy Tétrault Notes:

For the better part of nearly 20 years, numerous forms of ‘free’ and ‘open’ licensing of intellectual property have seen widespread use, the most prevalent of which have taken root in the computer software industry. The licensing models in question have spawned veritable communities of supporters and promoters, all of which seek to encourage the greater acceptance of these models throughout a broad base of users and developers. More recently, free or open content licensing has become an important part of the strategic direction of many of the largest corporations involved in developing and distributing software products and services, as well as other creative content.

Typically, these licensing models share common features that relate to an overriding theme of content freedom,

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 whereby users are permitted to copy, Free Licensing versus Open modify or distribute the licensed content at Licensing Models either no cost or a very low cost to cover its transfer to the user. In one of its more The terms ‘free’ and ‘open’ in relation to common variants, for instance, open source intellectual property licensing trace their software licensing as exemplified by the origins to the emergence of two movements GNU GPL, the permitted licensed activity in the software industry. These are is coupled with a requirement to share the immediately distinguishable by the fruits of enhancements made in relation respective policy approaches they have to the underlying licensed work — and this, espoused in relation to the commercial moreover, according to the very same software development industry. licensing terms from which those modifications were originally allowed. a) The Free Software Foundation

As will be discussed in greater detail below The ‘free software’ community was and in future parts, the latter notion in many formed in the mid-1980s in answer to ways challenges what many consider to be traditional methods of proprietary one of the fundamental tenets of intellectual software distribution. The proprietary property — namely, its otherwise proprietary approach to software distribution and exclusive nature. Proponents of these typically involves only object code licensing schemes have referred to this copies of the licensed software, with reciprocal and successive imposition of legal or technological restrictions licensing conditions as ‘copyleft’ or ‘share preventing user access to underlying and share alike,’ whereas those who are source code. more sceptical of these models have used Under the ‘closed source’ approach, the expressions ‘infectious,’ ‘tainting’ or end-users of licensed software therefore ‘viral’ in describing their effect. remain captive to the developer or Whatever the appropriate characterization, distributors for modifications, whether it remains important for business enterprises for purposes of feature enhancement and their advisors to understand the practical or error correction. In reaction to this workings of free and open content licensing, model, the free software community as well as the legal risks and opportunities based itself on the overriding principles involved in adopting these licenses in the that the public should have the freedom creation, development and exploitation of to study, change and redistribute technology and other forms of intellectual software, and that this freedom would property. enable software users to engage in self-help or participate in a community of users for purposes of making any

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 modifications to the licensed software. that are essential to interfacing with Thus, ‘free’ as understood in this context hardware, to the GNU operating system relates to freedom of use, as opposed project. Together with other GNU to software necessarily made available tools, the resulting operating system without charge. Some members of the package became known as GNU/Linux. free software movement have argued The FSF eventually adopted the Free that software should never be Software Definition in order to proprietary, and this view was elucidate the main distinguishing understandably perceived in some features of what it considered to be quarters as threatening to the very the requirements of free software. model upon which most successful software corporations have flourished b) The Open Source Initiative over many years. In contrast, the open software The formation of the free software movement set out to differentiate community is largely credited to Richard itself from what some viewed as the Stallman, who in 1983 founded the Free anti-business slant of the free software Software Foundation (FSF), a worldwide movement. It believed that business advocacy group that promotes the was not embracing the free software creation of software according to the model because the word ‘free’ free software paradigm. At the same connoted an unintended meaning time, Stallman initiated an operating associated with the distribution of system project where source code was software at no charge. The open made freely available to users and software movement likewise sought developers. The software in question to promote the acceptance and use was an alternative to the then widely of open source software, but without used UNIX operating system, and it was overt attempts to ignore or alienate called GNU, an acronym for GNU is not the commercial software industry. UNIX. By February 1989, Stallman began to promote version 1 of the GNU GPL, The business case for open source which formed the basis for version 2 of software became that of cheaply the same license, currently in wide available and highly reliable software circulation. that is peer-reviewed and backed by a ready community of collaborative The free software movement was developers. This more pragmatic bolstered when Linus Torvalds movement began to form in January contributed the Linux ‘kernel,’ those 1998, roughly at the time Netscape core aspects of an operating system announced its intentions to release

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 the source code for its Navigator web In fact, the FSF makes it clear that browser. The open source movement copyleft is not an essential element of eventually came to fruition as the Open what it considers to be free software. Source Initiative (OSI), a California public However, the most popular FSF licenses benefit corporation. The OSI popularized in the form of the GNU GPL and the GNU the alternative term ‘open source’ to Lesser General Public License employ describe its model of licensing involving copyleft provisions to propagate the collaborative development and readily requirement of source code distribution available source code distribution. for certain modified works derived from It adopted the Open Source Definition GNU GPL or GNU LGPL licensed works. to promulgate what the organization properly considers to be the essential The Open Source Definition contains attributes of open source licensing. 10 requirements, compared to the four previously described as forming part of c) Attributes of free and the Free Software Definition. The OSI open software licensing requirements for defining open source software, as found in the Open Source The definitions adopted by the free Definition, closely mirror those of the software and open software movements FSF for defining free software. For are similar in many important respects. instance, the OSI requirements include The FSF Free Software Definition those of free redistribution and source comprises four conditions: the freedom code dissemination, together with the to run a program for any purpose, the obligation to allow derived works and freedom to study and adapt it to one’s permit them to be distributed under needs, the freedom to redistribute the same terms as the license to the copies to help others and the freedom originally licensed software. While the to create improvements and release latter requirement at first blush appears those improvements for the benefit of to convey the notion of copyleft, the the public. One popular misconception language, when read more critically, is that the Free Software Definition is simply permissive in nature. In other mandates the use of ‘copyleft’ licensing, words, the open source licensor under namely a self-propagating licensing the OSI paradigm need not preclude condition that couples any permission to the adoption by the licensee of make modifications to licensed software reciprocal licensing terms in order for with the requirement that any further the software licence to qualify under public distribution be made on the very the requirements. On the other hand, same permissive terms. under copyleft principles as traditionally understood, the licensee is required to

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 adopt reciprocally the same terms of to whether the user is entitled to modify the distribution as have been originally work, whether a share-alike obligation akin granted by the licensor. to copyleft applies, or whether commercial or non-commercial purposes are tolerated Thus, apart from what some have for the uses to which the licensed work is recognized as a non-commercial policy being authorized. Other licenses are also bias and a stated preference for the made available for copyright owners to adoption of copyleft licensing schemes relinquish their rights in their works, on the part of the FSF, the officially dedicate such works to the public or reduce promulgated definitions of both the the available term of copyright protection. FSF and the OSI produce very similar requirements for software that We have seen above that the available qualifies as either free or open source. models of open source licensing are imbued For this reason, we use the expression with particular policy leanings or biases. ‘open source’ in describing both forms To the extent that Creative Commons of licensing in relation to software licensing models are likewise motivated by when the conditions of distribution philosophical undercurrents, for Creative generally provide for expansive rights Commons proponents, these are based upon of modification and redistribution with the belief that culture and the creative underlying access to source code on process in our society have come under the part of the licensee. increasingly unreasonable controls at the hands of copyright law. This is attributed Creative Commons Licensing Models to historical factors such as a lengthening of the duration of copyright, an expansion Much in the same manner as the open source in the scope of protected works and licensing models described above, ‘Creative in what constitutes infringing activity, Commons’ licensing schemes seek to the pervasive use of technology in the promote the collaborative sharing and reuse distribution and regulation of works, and of intellectual property assets in the form of market concentration in the content creative works. The Creative Commons is a creation and distribution industries. non-profit organization based in the US, and it owes its foundation to Lawrence Lessig, To the practitioner in private practice, an academic in the field of cyberspace law. an appreciation of the belief systems and Generally speaking, a copyright owner may policy positions of those who promote the select from among various pre-packaged various open content licensing schemes is licensing schemes under the auspices of useful in gaining insight into interpreting the Creative Commons paradigm. These the terms and conditions applicable to the licensing schemes vary on the basis of use, modification or distribution of licensed combinations of requirements amounting

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 works. Such an appreciation also helps in DOMAIN NAMES assessing the risk of potential litigation or other enforcement activity in the context Canada: of a presumed breach or irregularity CIRA Panel Transfers Protest Site to Targeted Company involving such terms and conditions. A panel acting pursuant to the Canadian One perceived problem certain forms of Internet Registration Authority (CIRA) Domain Creative Commons licensing share with Name Dispute Resolution Policy (the Policy) some particular examples of open source ruled in late June that the registrant of a licensing is the imposition of a copyleft protest or “gripe” site had to transfer her regime on the user of the licensed open registration to her target, a builder with content work. As previously explained in which she had had an ongoing dispute relation to the GNU GPL, the potential relating to the quality of a new home. result is that any work derived from the licensed work in some way may be required The registrant had registered the site to comply with the very same terms and mckeehomes.ca in February 2007 to “detail conditions under which the licensed work the buying experience of a McKee Home from was procured. For software licensing, this a customer point of view” and to “provide would often include the obligation to make a forum where all Canadian consumers can available to the public the source code of a detail their buying experience with their home modified work. Some of the legal issues builders.” It appears from the panel decision surrounding the copyleft nature of open that she and her fiancé had had continuous content licenses will next be described in problems with a new home purchased from the particular context of the GNU GPL. the builder, who was “largely unresponsive to the registrant’s multiple requests that Contact: the deficiencies be addressed.” The builder Alfred A. Macchione in Toronto at already controlled the site mckeehomes.com. [email protected] The protest site’s home page stated prominently that it was not affiliated with the builder, and evidence suggested that browsers searching for ‘McKee Homes’ through the Google and Yahoo search engines would turn up a link title and site description clearly labelling mckeehomes.ca as a “customer point of view” site. Although the site never developed beyond a single ‘Under Construction’ page, it appears that

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 the registrant’s ambition was to create a McCarthy Tétrault Notes: user-driven site where readers could report on their experiences with McKee Homes and Assuming that the Registrant declines to other builders. seek a court order voiding the decision, the clear implication of the Panel’s reasoning is The panel ruled that (i) the builder was that there cannot be a ‘legitimate’ use of a the owner of the common-law trade-mark domain name identical to a common law or MCKEE HOMES before the registrant registered trade-mark belonging to another registered the domain name; (ii) the domain entity, regardless of the site’s claims on the name was confusingly similar with the mark basis of freedom of expression and lack of in appearance, sound and in the ideas motive of commercial gain. For the moment, suggested by the mark; and (iii) the registrant commercial clarity has trumped freedom of registered the domain name “in bad faith,” expression, extending rights well beyond specifically because she registered it trade-mark law, where a successful “primarily for the purpose of disrupting the infringement or passing off action requires business of the Complainant” in violation that the infringer improperly use the of the Policy. The panel made the third trade-mark in connection with the provision ruling despite its findings that the registrant’s of wares or services, as in the famous submissions were “genuine and sincere” Michelin v. C.A.W. case. and that the registrant was not reaping a commercial benefit from the use of the Accordingly, if other panels follow the domain name. decision, it appears that gripe sites must announce their motives in the domain name These findings did not amount to a “legitimate by terming themselves “ihatecompanyx.ca” interest” allowing the registrant to use the rather than “companyx.ca.” While this domain name for a critical purpose despite presents an opportunity for companies to paragraph 3.6(d) of the Policy, which push critical sites farther from their core specifically allows for good-faith non- Internet presence, it remains prudent to commercial criticism or reporting. In the register company names at all relevant panel’s view, the registrant could not Internet hubs to capture and manage overcome the “false impression” inherent Internet traffic flow and to avoid the in its use of an identical domain name, pain and expense of a panel proceeding. despite the steps taken to minimize confusion through Internet searches and at the home It should also be noted that in the US, a page of the site itself. coalition of large companies is attempting to achieve similar remedies through the political process, both domestically and

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 through a yet-to-be-proposed Word Intellectual Property Organization cybersquatting treaty. Though this movement is in its infancy, it bears watching as forces clash over whether the major Internet suffixes (.com, .ca, etc.) are to be controlled by business or will remain part of an intentionally chaotic marketplace of ideas.

Contact: Daniel G.C. Glover in Toronto at [email protected]

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Technology Finance

TECH-RELATED FINANCE One reason for this is the delisting from the Canadian public capital markets of a North America: good number of larger Canadian public Taking Your Tech Company Public companies as a consequence of their acquisition. A lot of foreign money was Over the past 24 months, the North American paid to Canadian retail and institutional IPO market has shown some resurgence, at least investors for Inco, Falconbridge, Fairmont, in relation to the six years that came before. Intrawest, and now some of this money The last peak for IPOs was in 2000, then the is looking for other Canadian prospects following ‘time of tech troubles’ helped reduce to invest in. New public Canadian tech the number of tech (and other) companies companies might be just the answer, looking to list their shares publicly. But in 2006 at least for some of this liquidity. and 2007, the number of companies doing IPOs has grown steadily, in the US reaching a Given the resurgence in the IPO market, seven-year high in the first quarter of 2007. this article focuses on the IPO legal process, together with certain legal McCarthy Tétrault Notes: aspects related to running a company after its shares are listed on a stock In Canada, there have also been a number exchange. And while the focus will be on of tech company IPOs; since the beginning tech companies, much of this commentary of 2006, Canada has seen 13. For example, applies equally to any type of business that year, Constellation Software Inc. looking to go public. But before delving raised $80 million for its owners, at an into legalities, here are some thoughts initial price of $17 per share. Recently, on the all-important decision by the the company’s shares have traded in the controlling shareholders to take their $25 range. In 2007, some smaller IPOs were company public. brought to market by tech companies such as Espial Group (raising $25 million) and Why Go Public? Terago ($50 million). While this activity (and some other tech IPOs) might not When a company ‘goes public’ through an herald a return to the halcyon days of the IPO, it essentially sells some of its shares late 1990s (which is just as well, given the to retail and institutional investors, and hangover with which that party ended), those shares are then invariably listed on many industry watchers believe that there a public stock exchange, where the price is appetite again for the reasonably priced for the shares floats up or down depending tech (and other industry) IPO. on a range of factors related both to the

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 financial performance of the company and senior management), will reinvest much the state of the capital markets (and the of the proceeds of their sale into new, broader economy) more generally. In order start-up ventures (and the virtuous tech to become public, the company must go company cycle of establish, build, grow through a rigorous process of information and sell will begin again). disclosure centred around an extensive, written prospectus, and once public, must Accessing Growth Capital adhere to a range of rules on timely legal and financial disclosure. Why would a Often, however, (and over the past few business owner want to jump through years with somewhat greater frequency all these hoops? than in the previous five years), Canadian tech entrepreneurs do not want to sell Many in the Canadian tech sector do not. their companies, but rather want to stick In fact, many owners and managers of tech around and build them. Moreover, they companies have a good long look at the want to grow their companies, either costs and benefits of going public or staying by hiring additional staff with which to private, and choose the latter. Equally in undertake the development or selling of the US, there are some significant private new products or services, or by acquiring tech companies, such as SAS. other companies with complementary or related products (the Constellation and Moreover, if the owners of a private Cognos models). company want liquidity (that is, they want to turn the shares they hold in their For a tech company to either expand its private tech company into money), they current capabilities or buy a competitor, can always just sell the company outright it requires serious investment dollars. This to an interested buyer rather than sell a brings us to probably the leading reason part of the company to public investors. for a company to go public: to increase its And this is still the most common way access to capital. In an American survey shareholders of private Canadian tech of CEOs and CFOs of US companies (both companies achieve liquidity — by selling to tech and other) that have recently gone typically non-Canadian-based larger public public, over 69 per cent said their prime tech companies, such as IBM (though, rationale for the IPO was to access capital usefully, companies like Constellation (presumably at rates that were more Software and Cognos are now acquirors as favourable than the alternatives). well). Indeed, there is by no means any shame in such an exit, particularly given Minting Your Own Currency that the founding entrepreneur of the sold In this survey, 15 per cent of respondents company (and often several of his or her indicated their main reason for going public

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 was to be able to use the resulting public advised not to sell all his or her shares at stock as a ‘currency’ for acquisitions. That this premature juncture. is, as a public company, you can either buy other companies and exchange their shares This is where an IPO might make good for shares of your own company, make it a sense. Upon the IPO, the founder either combination of shares and cash, or do an sells very few or no shares, but waits all-cash deal. until a market has truly evolved in the now public company shares. Presumably, Accordingly, if you put together these the valuation of the company increases two categories of survey respondents, as the true potential of the company 84 per cent of companies going public is realized. Then, from time to time, recently (at least in the US) did so for the founder can sell some shares, all the financial reasons and in order to grow while working hard to increase the value the business. The same dynamics should of his or her remaining shares. hold true in Canada. In a similar vein, other employees of the A Delayed Payday public company can begin to cash out some of their shares once the company is public There are several other good reasons why and there is a liquid market for the shares. companies go public. The survey noted Equally, the company can better recruit above found that 31 per cent of senior staff as a public company, assuming they executives had done so to ensure that have a share purchase program that allows they, as well as other managers holding employees to purchase shares of the public shares and principal shareholders, would company on some favourable basis. be able to make some money by selling some (but not all) their shares upon or Prestigious Public Companies soon after the IPO. One reason popularly perceived as a very This is not surprising. A founder of a tech important one for going public is ‘publicity company, for instance, may have the and prestige.’ It is often thought that bulk of his or her net worth tied up in the people would much rather work for a shares of his or her company. As a private widely known public tech company than company, there is no ready market for for a relatively small, private one. In the these shares. The founder could sell the survey noted above, only nine per cent of whole company outright (as noted above), respondents cited publicity and prestige but he or she may believe the company as the main drivers behind going public. is unfairly undervalued, given the rather This is an interesting insight (if indeed early state of development of the it is accurate). It tells us that fairly company. The founder would be well- few founders and other shareholders

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 are motivated principally by what others think when it comes to the all-important ‘Go — No Go’ IPO decision. Rather, the urge to build good companies through growth is the prime driver behind taking tech (and other) companies public. And this is how it should be.

In the next issue of the TLQ, we will begin to look at the legal process involved in going public.

Contact: George S. Takach in Toronto at [email protected]

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Intellectual Property Canadian distributor of both Côte d’Or COPYRIGHT and Toblerone bars (i.e., KCI had exclusive importation and distribution contracts with Canada: KFB and KFS, respectively). Notwithstanding Euro-Excellence v. Kraft Canada Inc. — Case Comment these exclusivity agreements, Euro- Excellence continued to import and Kraft Foods Belgium SA (KFB) and Kraft distribute both Côte d’Or and Toblerone Foods Schweiz AG (KFS) make Côte d’Or and bars, which it had acquired legally in Toblerone chocolate bars in, respectively, Europe. Euro-Excellence was successful Belgium and Switzerland. Kraft Canada Inc. enough in its distribution of the chocolate (KCI) had distributed Toblerone bars in Canada bars to give KCI cause to attempt to find as exclusive Canadian distributor since 1990. a way to prevent Euro-Excellence from KCI was an authorized Canadian distributor importing and distributing them. of Côte d’Or bars before 1997, and in 2001 KCI is the owner in Canada of the trade- entered into an exclusive agreement to marks ‘Côte d’Or’ and ‘Toblerone.’ On distribute the bars in Canada. October 25, 2002, KFB registered three McCarthy Tétrault Notes: Côte d’Or logos in Canada as copyrighted works in the artistic category. That same Euro-Excellence also imports both day, a licensing agreement between Toblerone and Côte d’Or bars into Canada KFB and KCI was also registered, pursuant and distributes those bars here. Beginning to which KCI purported to “acquire the in 1993, Euro-Excellence was an authorized sole and exclusive right and license in distributor of Côte d’Or bars. For a period the Territory to produce, reproduce and of approximately three years ending in adapt the Works or any substantial part 2000, Euro-Excellence was also the thereof, in any material form whatsoever, exclusive Canadian distributor of Côte and to use and publicly present the Works d’Or bars. That distribution contract was in association with the manufacture, not renewed. Since 2000, Euro-Excellence distribution or sale in Canada of has imported genuine Côte d’Or bars as confectionary products, including, but an unauthorized distributor. In 2001, not limited to, chocolate.” Euro-Excellence began importing and distributing genuine Toblerone bars, Also on October 25, 2002, KFS registered also on an unauthorized basis. two Toblerone logos in Canada as copyrighted works in the artistic category, Thus, from 2001 until the litigation and entered into a substantially similar commenced, KCI was the exclusive licensed licensing agreement with KCI.

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Armed with these new copyrights, KCI foreign publisher and imported into called upon Euro-Excellence to cease Canada without the consent of the and desist distribution of any product Canadian exclusive licensee. to which the copyrighted works were affixed. When Euro-Excellence refused, The decision is a very complicated one, KCI brought this action. owing in large part to the fact that four separate opinions were delivered in the The key issues in the appeal were the case. Much of the complexity also resulted following: from an attempt by the respondent (KFS) to prevent the parallel importation of • Can an exclusive licensee in Canada chocolate bars by claiming secondary claim protection against secondary infringement related to logos affixed infringement when the copyrighted to the chocolate bars at the time of work was produced by the owner- importation and sale. licensor? Contact: • Is a work ‘sold’ within the meaning of Barry B. Sookman in Toronto at Section 27(2)(a) if it is merely affixed [email protected] (as a logo) to a non-copyright good?

• Are the rights under the Copyright Act to be read down to protect only the legitimate economic interests of the copyright holder?

In short, the Supreme Court held (5 to 4) that an exclusive licensee in Canada can claim protection against secondary infringement when a copyrighted work is produced by the owner-licensor and imported into Canada without the consent of the exclusive licensee.

This means a Canadian publisher can resort to the secondary infringement provisions of the Copyright Act, provided it is an exclusive licensee of a foreign publisher with respect to books published by the

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Privacy

CASES/LEGAL DEVELOPMENTS of, personal information. The Privacy Breach Guidelines are intended to help Canada: organizations take appropriate steps in Privacy Commissioner of Canada the event of a privacy breach, and to Releases Privacy Breach Guidelines provide guidance in assessing whether notification of affected individuals is In August 2007, the Privacy Commissioner of required. Canada released new guidelines for how organizations subject to the Personal The Commissioner laid out four key steps Information Protection and Electronic to consider when responding to a breach or Documents Act (PIPEDA) should respond to a suspected breach: (i) breach containment privacy breach (Privacy Breach Guidelines). and preliminary assessment, (ii) evaluation of the risks associated with the breach, McCarthy Tétrault Notes: (iii) notification and (iv) prevention.

The issue of privacy breach notification has Important considerations in Step 1 gained momentum in recent months, given include containing the breach by stopping a number of high-profile data breaches the unauthorized practice and attempting involving the personal information of millions to recover the records; designating of consumers and a Parliamentary committee appropriate individuals to lead the report featuring a statutory review of investigation team; and assessing whether PIPEDA. The Fourth Report of the Standing the breach involves theft or other criminal Committee on Access to Information, Privacy activity and, if so, notifying the police and Ethics recommended that PIPEDA be (being careful not to destroy evidence). amended to require organizations to report certain defined breaches of their personal Step 2 is a risk assessment process that information holdings. Given that it is not involves: known when Parliament will act to amend PIPEDA, the Commissioner’s publication 1. considering what personal information is intended to provide some voluntary is involved and how sensitive it is; guidelines in the interim for organizations that have experienced data breaches. 2. determining the cause and extent of the breach, e.g., how many The Commissioner stated that a privacy individuals are involved, what the breach occurs when there is unauthorized risk is of ongoing breaches or whether access to, or collection, use or disclosure the information was recovered;

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 3. identifying individuals affected by the be delayed to ensure the investigation breach, e.g., employees, contractors, is not compromised. Depending on the public, clients, service providers or circumstances, individuals affected may other organizations; and be notified directly, indirectly (e.g., via website notices or media) or through a 4. assessing the possibility of foreseeable combination of the two. harm. (This requires considering expectations of the data subjects and The notification content will vary possible risks to the individuals and the depending on the particular breach and organization, as well as possible harm the method of notification chosen. The that could come to the public as a guidelines lay out the information that result of notification of the breach.) should be considered. The Commissioner encourages organizations to report material Step 3 involves considering whether to privacy breaches to the appropriate privacy notify interested parties. The Commissioner commissioner(s) to help them respond observed that the decision of how to to inquiries from the public and any respond should be made on a case-by-case complaints they may receive and to seek basis, and suggests that businesses should advice or guidance. Depending on the notify people and/or the appropriate circumstances, it may also be appropriate privacy commissioners that personal to inform police, insurers, professional information has been compromised in or other regulatory bodies, credit card cases where the breach raises a risk of companies, financial institutions or credit harm. Promptly notifying individuals reporting agencies, and other internal or may help them mitigate the damage by external parties. taking steps to protect themselves. The decision about whether to notify will Step 4 aims to ensure the privacy breach involve considering legal and contractual does not recur. Organizations should take obligations, the risk of harm to the time to investigate the cause of the breach individual (e.g., identity theft or fraud, and consider developing a prevention plan. physical harm or damage to the individual’s reputation) and the ability of the individual Contact: to avoid or mitigate possible harm. Barbara A. McIsaac in Ottawa at [email protected] If notification is deemed appropriate, it or should occur as soon as reasonably possible Howard R. Fohr in Ottawa at following assessment and evaluation of [email protected] the breach. However, if law enforcement authorities are involved, they should be consulted about whether notification should

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 International: Internet use, the decentralization of OECD Issues Recommendation on information-processing arrangements and Cross-Border Privacy Enforcement decreasing communication costs have all contributed to increased cross-border On June 12, 2007, the Organisation for data flows. Economic Co-operation and Development (OECD) Council adopted the OECD The report states that the majority of Recommendation on Cross-Border Co-operation respondents found that restrictions on in the Enforcement of Laws Protecting Privacy, information-sharing were a specific which updates OECD guidelines on privacy and obstacle to effective cross-border trans-border data flows, first published in 1980. enforcement of privacy laws. Other The recommendation was developed by the challenges included difficulties in OECD Committee for Information, Computer identifying a contact point in member and Communications Policy (ICCP), through its countries, differing enforcement priorities, Working Party on Information Security and insufficient preventive or remedial powers, Privacy (WPISP). The work of the Committee inconsistent legal regimes and practical was led by Jennifer Stoddart, Canada’s Privacy obstacles such as resource constraints. Commissioner. The recommendation was borne out of the McCarthy Tétrault Notes: report and further roundtable discussions. Its adoption reflects a commitment Events Leading Up to the by OECD member governments to Recommendation increase international co-operation In 2006, the OECD undertook a re- and communication in order to enhance examination of privacy risks and cross-border cross-border privacy protection. challenges associated with cross-border data The recommendation explicitly recognizes flows, including circulation of a questionnaire the benefits, including business efficiency to OECD member countries. The results of and user convenience, that the increase the re-examination were published in the in international flows of data has brought OECD’s Report on the Cross-Border to organizations and individuals. Enforcement of Privacy Laws in 2006. But the recommendation also highlights The OECD initiative was driven by that such flows have raised new challenges concerns about the privacy risks associated and concerns with respect to the protection with growing cross-border data flows. of privacy and effective enforcement of Globalization, offshore outsourcing, privacy laws.

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Canadian Concerns Investigations by the Office of the Privacy Commissioner (OPC) regarding international In May 2007, Commissioner Stoddart data transfers in 2006 included the transfer submitted her 2006 Annual Report to of financial information about individual Parliament on the Personal Information Canadians to US authorities through the Protection and Electronic Documents Act Society for Worldwide Interbank Financial (PIPEDA). The report includes the following Telecommunication (SWIFT). The OPC statements: launched an investigation to determine whether SWIFT was improperly disclosing When personal information moves personal information to foreign authorities. across borders, it may become subject OPC found SWIFT did not contravene to different legal regimes. Individuals PIPEDA when it complied with lawful may lose some of their privacy rights, subpoenas served outside Canada and such as the ability to request access disclosed Canadians’ personal information to the information or seek redress to foreign authorities. However, the report if the information is unlawfully used also observes that: or disclosed. the disclosure process could have been Countries around the globe are more transparent if the government recognizing the need to make the bodies involved had used existing protection of personal data as it crosses information-sharing mechanisms, which borders as seamless as possible. With have privacy protections built in. We greater awareness of the threats have asked Canadian officials to work associated with increased trans-border with their US counterparts to encourage data flows, consensus is emerging them to use these mechanisms, rather around the importance of promoting than the subpoena route, to obtain closer co-operation among privacy information in the future. enforcement authorities in different countries. Based on this and other experiences with international data transfer investigations, While PIPEDA’s “Accountability Principle” the report recommends that the Privacy makes an organization responsible for Commissioner be given specific authority personal information under its control, to share investigation information with without distinguishing between domestic international counterparts, while and cross-border transfers of data, the co-operating on investigations of mutual report concludes there is room for interest. improvement in investigation and enforcement activities. The OECD Recommendation can facilitate this type of co-operation.

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Key Points of the Recommendation • member countries should provide their Privacy Enforcement Authorities The recommendation recognizes that, with mechanisms to share relevant although regional instruments are in place, information with foreign authorities a more global and comprehensive approach relating to possible violations of laws to cross-border co-operation is desirable. protecting privacy; Its main focus is the authority and enforcement activity of any public body • member countries should enable their responsible for enforcing laws protecting Privacy Enforcement Authorities to privacy (Privacy Enforcement Authorities). provide assistance to foreign authorities It also highlights and maintains a focus on relating to possible violations of their co-operation with respect to privacy law laws protecting privacy; violations that are most serious in nature. • requests for assistance should include The recommendation sets out three main the purpose for which the information goals: improving domestic measures to requested will be used as well as enable cross-border co-operation, sufficient information for the requested improving international co-operation and Privacy Enforcement Authority to take creating a procedure in which member action; and countries can request the assistance of other member countries. Specifically, it • Privacy Enforcement Authorities should recommends that: take appropriate steps to maintain the confidentiality of non-public • member countries develop and information exchanged and respect maintain effective domestic measures any safeguards requested by the Privacy that enable Privacy Enforcement Enforcement Authority that provided Authorities to co-operate effectively the information. with both foreign and other domestic Privacy Enforcement Authorities; Related Efforts

• member countries ensure that Initiatives to implement the Privacy Enforcement Authorities have recommendation are already underway. the necessary authority to prevent The OECD has developed two model forms and act in a timely manner against to facilitate privacy law enforcement co- violations of laws protecting privacy operation. The first is a form to assist in committed from their territory or the creation of a list of contact points in that cause effects in their territory; each country to co-ordinate requests for assistance. The second form is to be used

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 by authorities requesting assistance from another country. Authorities must specify the privacy principle(s) at issue (e.g., data quality, security safeguards or transparency), as well as possible violations of law and potential sanctions.

The recommendation was introduced at the 29th International Conference of Data Protection and Privacy Commissioners, which was hosted by Commissioner Stoddart in Montréal at the end of September 2007. The OECD also introduced the recommendation at the 2007 Asia Pacific Economic Cooperation privacy meeting and intends to do the same at several other regional events.

Contact: Stephen Rawson in Toronto at [email protected]

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Communications

CASES/LEGAL DEVELOPMENTS raises relatively few regulatory challenges. By contrast, the emergence of competing International: VoIP services, typically offered by Voice over IP Services — Regulatory alternative service providers such as ISPs, Perspectives from the Developed and ‘cybercafés’ and prepaid calling card Developing Worlds — Part III suppliers, raises significant regulatory issues in developing countries. This article continues our four-part series focusing on the regulatory issues surrounding One response by governments and regulatory voice over Internet protocol (VoIP) services. authorities has been to ban or prohibit the It examines regulatory issues encountered in offering of VoIP services by alternative developing country markets, particularly where service providers. The situation is dynamic, voice telephone service competition is limited. and individual country practices are constantly changing. However, a June 2004 More specifically, this article will examine the paper on VoIP regulation in Africa prepared basis and practical effects of banning VoIP for the Commonwealth Telecommunications services, and regulatory challenges faced by Organization identified 17 countries that more permissive developing country markets. prohibited VoIP offerings, and a further The article concludes with observations on why 17 African countries that restricted VoIP telecommunications regulations and policies service offerings to previously licensed should encourage VoIP service development, network operators. rather than banning or otherwise interfering with such services. VoIP service prohibitions and restrictions have been adopted in many other countries McCarthy Tétrault Notes: as well, including Belarus, Israel, China, India, Pakistan, the United Arab Emirates We begin with a point of clarification. and the Philippines. In this article, VoIP means an end-user oriented commercial offering that Pending market liberalization and the competes with conventional voice end of its current service monopoly, QTel telephone service. Even conventional voice remains the exclusive provider of public services often make use of transmission international and long-distance services facilities that include Internet protocol in Qatar, and the provision of such services transmission. The use of Internet protocol by any other service provider (including by standards or facilities as part of the means of VoIP) is prohibited. underlying transmission of voice traffic

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 The situation in Qatar provides a good National security and public welfare illustration of at least one basis for concerns will be better met by ensuring prohibiting competing VoIP services. that the regulatory and technical challenges In any country that licenses only a single of IP traffic monitoring are addressed more provider of international, long-distance generally, with voice applications seen as or telecommunication services generally, only one of a number of means of Internet prohibiting the provision of competing protocol communications. telephone services by any other service provider, including by means of VoIP, will Another argument for prohibiting or be seen as appropriate. The use of Internet restricting competing services is based on access to provide competing voice telephone the preservation of international and other services would be an inappropriate erosion long-distance revenues for incumbent of the exclusivity granted to the single service providers. Markets that permit no licensed service provider. competition or only limited competition in international and other long-distance Prohibitions and restrictions are also services are typically associated with defended on the basis of fairness and substantially higher long-distance charges. regulatory effectiveness. It would not The difference between the per-minute be fair to require conventional service rates charged to end-user customers and providers to obtain and abide by license the traffic carriage costs of the long- terms and conditions while permitting distance service provider (which includes unlicensed service providers to operate ‘settlements’ and other payments to third and compete without such regulatory party network operators for the transit oversight. Similarly, regulatory or termination of long-distance traffic) effectiveness is compromised whenever represents profit to the long-distance people engage in conduct that does not service provider. In countries with limited meet regulatory requirements, including or no competition, these profits tend to be obligations to obtain licences for the supply very high and may be critically important of public telecommunication services. to the overall financial performance of the service provider. Concerns have been expressed in many countries regarding the ability to intercept In many countries, the situation is or monitor VoIP traffic, and these concerns complicated further by historical patterns of are sometimes relied on to support VoIP cross subsidy between telecommunications service restrictions. However, the service markets. For example, in markets monitoring and interception of IP traffic with limited or no competition, is a much broader challenge and is not telecommunications service pricing is properly tied to VoIP service offerings alone. often deliberately distorted so that the

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 licensed service provider is permitted to In more competitive markets, of course, charge rates substantially in excess of the increased revenues are distributed underlying costs for long-distance among multiple service providers. But (particularly international) services, regardless of the eventual distribution of and to charge substantially less than the service revenues and profits, consumer underlying costs of installing individual welfare in international service markets subscriber access lines and providing basic will be improved where service rates are local services. The understanding is that the closer to costs. increased profits from long-distance services will both contribute to the general viability The argument that greater profits from of the service provider and also provide international or long-distance services are revenues that can be used to cross-subsidize an appropriate way to encourage local subscriber access and local services. access and service development (from cross- subsidization) should be tested as well. These circumstances will give rise to understandable concerns about loss of There is little evidence that teledensity licensed service provider revenues and (measures of telecommunications service profits resulting from VoIP service availability per number of households competition (i.e., where VoIP services or population) substantially improves in are offered by anyone other than the countries that have adopted this approach licensed service provider). to cross-subsidization. Unless specific mechanisms are implemented that require But the economic arguments supporting service providers to apply increased prohibitions and restrictions can and revenues or profits from long-distance should be challenged. International services to specific local access or similar service markets that have limited or no service development schemes, service competition are typically associated with providers will more likely retain, distribute the highest per-minute service charges. or otherwise apply these revenues in In countries where international services accordance with other corporate are highly competitive, per-minute rates objectives. So long as the costs of installing decline to the level of underlying service additional access lines or providing basic provider costs (which are even lower for residential service significantly exceed Internet protocol—based services). These the tariffed rates for these services, lower rates substantially stimulate traffic service providers will have little or no volumes (as a result of price elasticity incentive to apply financial resources effects). In many cases, they also result to these categories of service. in even better total revenue performance than under limited competition scenarios. Large discrepancies between international service rates and underlying costs will almost

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 always result in significant bypass of countries would be better advised to focus conventional services regardless of any on anticipating and facilitating service prohibition or restriction on VoIP services. competition, including by removing Large corporate users often have the ability regulatory obstacles to competition. to send voice traffic over their private Among the policies and practices to be networks (resulting in bypass in high-volume addressed are: long-distance markets). Individual users are likely to have access to alternatives such • appropriate frameworks and procedures as call-back services or other grey-market for licensing new service providers; long-distance services enabled by some combination of very small aperture terminal • negotiating the early surrender of any facilities, data networks, prepaid card exclusive rights that would otherwise platforms and Internet protocol services. continue for a significant duration; and

Countries that take a restrictive • assisting incumbent service providers to approach to international and other adopt costing and pricing practices that telecommunications service competition remove inappropriate cross-subsidies, will fight a losing battle on other fronts and to rebalance rates so they better as well. WTO member countries are reflect underlying costs. under increasing pressure to liberalize Rate rebalancing is often a particularly telecommunications markets as part difficult exercise. Rebalancing presents of broader WTO trade initiatives. An hazards for both public authorities and increasing number of countries are making licensed service providers if price changes specific telecommunications market are not introduced carefully, including with liberalization commitments under the the benefit of a public communications GATS Agreement and related “Agreement campaign explaining the underlying need on Basic Telecommunications.” The for rebalancing and overall price effects on practical effect of those commitments consumers. Without such communication, is to introduce a timetable for market resistance and complaint regarding local liberalization, which will include removing service price increases will likely become exclusive rights in international service the predominant public reaction. Industry and long-distance service markets. stakeholders must explain the mix of Rather than diverting regulatory attention costs and benefits and the overall positive (and scarce resources) to the protection of impact on consumer and economic welfare, exclusive rights and prevention of greater so that the less attractive aspects of service competition, telecommunications rate rebalancing can be assessed against regulators and policy-makers in developing its benefits.

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Recognizing that rate rebalancing needs to and search features, IBM speculated that be carefully managed, it is reassuring to people are moving beyond niche to see the experience of OECD countries with individualized viewing. IBM called its study rate rebalancing between 1990 and 1998. The End of TV as We Know It.

Contact: If the state of the TV industry wasn’t scary Stephen Rawson in Toronto at enough, the music industry is experiencing [email protected] a meltdown in the face of illegal downloads. In Canada, retail sales of CDs have dropped by over 50 per cent from 1999 to 2006. Canada: While sales of digitally distributed music Canadian Cultural Product and have increased, they have failed to make the Long Tail: The New Economics up the difference. Illegal downloads are of Production and Distribution in Canada — Part I still pervasive. And last month, record labels EMI and Sony/BMG announced major layoffs This article begins a four-part series discussing in Canada and elsewhere. and exploring the effect of new technology on The story for movie theatres is also cultural products. Particular attention will be problematic. Although total box office paid to its impact on smaller titles, because admissions bounced back last year, theatre this is often where we see Canadian content screens will be dominated this summer productions. Some argue that the advent of by an unprecedented number of sequels new technology may actually be a good news coming from Hollywood. This raises a question: story. They suggest that the rise of the Internet What is the prognosis for the independent film? will lead to a renaissance of new cultural product. They also argue that you can do McCarthy Tétrault Notes: without those intermediaries: the record labels, the TV networks and the movie studios. The Curious Economics of Smaller titles, they argue, will become more Audiovisual Products accessible on the Internet. The impact of globalization on popular These are no doubt trying times for the culture around the world is an interesting traditional forms of media. A year ago, phenomenon, particularly with regard to IBM published a controversial study in the problems faced by smaller countries which it noted that audiences were seeking to find space and choice for local becoming increasingly fragmented, splicing cultural product in the face of the apparent their time among myriad media choices, market domination by the bestsellers and channels and platforms. And with the growing blockbusters, most of which come from availability of on-demand, self-programming the US.

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 On the trade side, a new international for cultural products — particularly convention has just come into force that audiovisual products such as films and seeks to permit countries to have their TV shows — do not behave like those own cultural policy without fear of trade for ordinary commodities. This is an retaliation. Some 56 countries have now area where not all is what it seems. ratified the UNESCO Convention on the Protection and Promotion of the Diversity These differences have been recently of Cultural Expressions. The US opposes analyzed by leading economists — among the convention and will continue to try to them, Harvard University professor Richard avoid its impact by negotiating bilateral Caves. And contrary to popular opinion, it trade deals with individual countries that can be demonstrated that the marketplace limit or restrict their cultural policies, for popular culture does not automatically as it has done with Chile, Australia and, provide what people want to see or hear. most recently, South Korea. However, In fact, it is a distorted or failed market. the convention has made it more difficult, if not impossible, for the US to further This seems hard to believe. After all, liberalize trade in audiovisual services or there is a market for films and TV shows, broadcasting services through the WTO and of course some are more popular than process. It has also served to educate others. So why not let the market decide? the world about the unique character of Well, because the market is different cultural products and services and why they for popular culture. Here are some of should not be subject to trade agreements. these differences.

On the technology side, the main First, the product is not utilitarian; it is developments have been (i) the further a product that communicates ideas. expansion of access to broadband in Second, cultural products have a very the home and (ii) a major increase low marginal cost per unit. In the case in downloads of audiovisual product. of broadcasters, the cost of adding an However, these developments have not additional viewer once you are changed the basic economic factors that broadcasting a program is effectively apply to the market for popular cultural zero. All the cost is up front. That is products such as film, TV shows, books a big difference between TV shows and and records. It is useful to start there. commodities such as cars or detergent. Economics is often a very dull subject. But Third, demand is notoriously unpredictable there is an interesting secret about popular for popular cultural products. And the cultural products. If you look closely, it timeline of demand is far shorter. becomes startlingly clear that the markets

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Fourth, there is incredible price the titles offered for sale account for discrimination in this field. A US TV drama 80 per cent of the revenue. All these costing US $2 million to make is sold in the products operate in a market that has US for $1.4 million, in Canada for $50,000 very high risk. Most movies fail at the box and in Brazil for $10,000. That kind of price office. Most new TV programs fail and are discrimination would be illegal if it were cancelled. Of course, they would all like to related to an ordinary commodity. It would become hits. But success is unpredictable. be called ‘dumping.’ But in the cultural We can now predict that the new Harry field, it is treated as normal practice. Potter book will be a bestseller, but could we have predicted that before the first Harry Fifth, gatekeepers affect demand. Potter book was published? Did you know What goes on the shelf or on the screen is that J.K. Rowling went to 11 publishers who determined not by consumers, but by the turned her down before the twelfth decided decisions of broadcasters, distributors, to publish her manuscript? Her book ended exhibitors, bookstores, rack jobbers and up, unpredictably, being a bestseller. other intermediaries. And the decisions But most books fail, that is, the revenue of commercial broadcasters are affected they generate is not enough to cover the by what groups of viewers can be sold to cost of production. advertisers, not necessarily what might interest a broader or more diverse range At the same time, the few titles that do of viewers. Understandably, commercial succeed produce a very high reward — broadcasters are interested in the much higher than for other products. Why? consumer, not the citizen. Because the marginal cost of adding more viewers or sales is very low, so any revenue And finally, we are talking about from advertising or ticket sales drops to intellectual property, which unlike a car the bottom line once you have covered or a box of detergent, is never consumed the initial cost. but can be made endlessly available. This is a market that rewards size. Only if So cultural products are quite different. you have size can you sustain the inevitable In fact, economists characterize such losses before the unpredictable hit comes products as TV shows as ‘public goods.’ along. And only if you have size can you At a technical level, a public good is a control the means of distribution to product whose cost does not vary with maximize revenue from all the windows. the number of people consuming it. Once you have size, you also have something else: a desire to avoid risk. When you look at the distribution of the How do you reduce risk? Well, first, you demand for cultural products, you run into have to be big enough to survive failure. the famous 80/20 rule. Only 20 per cent of

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 And then it helps if you own or control the experimental, the alternative, the exotic, distribution or exhibition windows. Control the local or the niche cultural products — over gatekeepers and tastemakers also works that reflect cultural diversity helps, as does selling in packages, dividing in a wider sense. That market will be markets and imposing price discrimination particularly deficient in smaller countries to maximize revenue. All of these are where dominance by foreign blockbusters standard risk-reduction techniques in will tend to exclude local entertainment the cultural products market. content. Such a marketplace will most likely be unable to ensure space and choice However, these techniques come at a cost. for local and diverse cultural expression. They increase concentration, they reduce diversity and they reduce choice. Four A ‘Cultural Toolkit’ to Support Diversity record companies — Universal, Sony/BMG, Warner Music and EMI — now control over What can governments do? 70 per cent of the dollar volume around the world in sound recordings. The six Clearly, we don’t want to infringe freedom Hollywood film studios dominate cinema of expression. We also don’t want to film screens and flood local television with prohibit the importation of foreign hard-to-resist drama. The concentration programming. Some industry players of media is growing across the globe. oppose censorship and the imposition of ‘Independent’ producers face more and prohibitory quotas that do not allow the more challenges to survive, whether in the best of foreign cultural products to be US or in any country where concentration enjoyed by citizens of every country. Local is increasing. cultural expression can be impoverished if it is not open to foreign ideas. But it can In the US, these market forces have equally be impoverished if it is dominated resulted in the rise of six multinational by the voices of another country. In the companies that now dominate the field end, it is possible to assemble a ‘cultural of audiovisual popular culture. The toolkit’ of measures that government can names are familiar: Disney, Time Warner, take to sustain or develop a broader range Murdoch/Fox, Viacom/Paramount, of popular cultural products without Sony/Columbia and Universal/NBC. undermining freedom of expression. So what is missing in this marketplace? What do these measures include? First, Left to itself, the market would tend and most common around the world, is the to focus on formulaic blockbusters and institution of public broadcasting. This is a bestsellers distributed by the largest and key support measure for cultural diversity, most vertically integrated companies. because public broadcasters can be given a It would tend to ignore the new, the specific mandate and obligation to support

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 programming that the market would would think they would never agree to not normally generate. In addition to program quotas — they have a regulatory their mandate to provide universal requirement of at least three hours per mainstream service to the whole public, week of children’s educational programming, public broadcasters are often required to applied to all private commercial TV stations. support linguistic minorities, children’s programming, experimental programs In Australia and Canada, commercial and, of course, arts and culture programs. broadcasters are required to broadcast a specified minimum amount of locally Second is the imposition of reasonable produced programming in genres like scheduling requirements on private drama, comedy, long-form documentaries broadcasters and other cultural gatekeepers. and children’s programming. In Canada, These scheduling requirements may simply the Canadian Radio-television and relate to local versus foreign content, or Telecommunications Commission imposes increasingly, they may require the broadcast scheduling requirements for ‘Canadian of program genres that would otherwise be content’ on over 100 specialized cable under-represented — for example, local or satellite channels, ranging from as drama, comedy or children’s programming. low as 15 per cent Canadian content to as high as 85 per cent, depending on the Requirements of this kind are typically program genre. imposed by a government regulator through regulations, license conditions In Europe, the Television without Frontiers or sometimes both. Hard experience directive requires that a majority of fiction around the world has shown that private programming be devoted to European works, broadcasters, left to their own discretion, where practicable. Compliance with the will always tend to broadcast the cheapest directive is left to the national governments, programming that can still deliver an who have jurisdiction over the originating audience. If Hollywood programs can signals. National governments also give deliver the same audiences as good varying interpretations to the term ‘where local programming but can be obtained practicable.’ In general, the directive is at a fraction of the cost of that local met by free-to-air television services in programming, private broadcasters face a most European countries. However, many huge temptation to maximize their profit, satellite-to-cable services do not meet the even if the programming is not as relevant majority rule, particularly those controlled to local audiences, or as popular. by US companies.

The imposition of reasonable scheduling A third tool in the cultural toolkit is the requirements is a common strategy used in imposition of expenditure requirements on many countries. Even in the US — where one broadcasters to support the programming

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 that is hardest to finance. For example, the broadcasters to devote at least 10 per cent pay television services in France, Canada and of their schedule or their program budgets Australia all have to devote a proportion of to programs acquired from independent their gross revenue, ranging between 10 per producers. In Canada, we have a rule that cent and 32 per cent, to investment in or 75 per cent of the Canadian comedy and licensing of local films. In Canada, all cable drama on commercial television must be and satellite distributors must contribute acquired from independent producers. 5 per cent of their revenue to a fund Again, the object of the exercise is to supporting local Canadian programming. promote diversity of source. In Italy, commercial broadcasters must spend at least 4 per cent of their revenue And last but not least, subsidies or tax on the support of Italian films. In France, incentives can support the creation of the number is 5.5 per cent. underrepresented programs. This is probably the most common tool in the Fourth, foreign ownership rules apply in cultural toolkit. Interestingly, the movie certain sectors. Broadcasters in the US, trilogy The Lord of the Rings would never Canada, Australia and many other countries have been made without tax incentives are required to be locally owned. In from Germany and New Zealand. countries outside the US, the effect of these rules is to create broadcast companies that Most of these measures have weaknesses provide a local ‘green light’ for the benefit as well as strengths, and they need to be of indigenous producers, so they have more carefully drafted and implemented in order doors to go to besides Hollywood. The to be fair and effective. In addition, the problem with foreign ownership rules, of cultural policy appropriate for one society course, is that the larger the local company may be quite different from that of another, becomes, the more its program choices just as every cultural product is unique. become indistinguishable from that of a multinational. Contact: Peter S. Grant in Toronto at Fifth, competition policy measures can [email protected] support independent production and lessen the dominance of gatekeepers. The US had a rule from 1970 to 1995 that prohibited the three commercial television networks from making or owning their own entertainment programs. Europe’s corresponding rule is the Television without Frontiers directive requiring

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Clean Technology

CASES/LEGAL DEVELOPMENTS and CEOs — need to take note. Its shorthand name is clean tech (but some Canada: also call it ‘greentech’). Clean tech Another Big New Tech Wave encompasses myriad new technologies, products and services aimed at reducing Lawyers and law firms need to be aware the adverse impact human activity has of every next big wave of technological on the natural environment. innovation. For instance, just considering communications technologies over the last In many ways, the impetus for clean tech is 150 years, some of the bigger waves were the being driven by the ever-increasing degree of telegraph, the telephone, radio, television, urbanization of the world’s population. In cellular communications and, most recently, 1800, three per cent of the world’s people the Internet. Each of these created a new lived in cities. One hundred years later, industry — and a great deal of interesting this figure had grown to 13 per cent. Yet in work for lawyers. the next 107 years, the figure ballooned to 50 per cent. And by 2030, estimates predict Further, each big new tech wave comprises a that three of every five persons will live in number of smaller subwaves. Often the real a city (a total of five billion people). trick is understanding what these constituent elements are. For example, it wasn’t enough to ‘Megacities’ are a major issue within simply realize in the early 1980s that humans urbanization. In 1950, only New York and would live through a computer revolution in Tokyo had over 10 million people. By 2020, the following 30 years. The real trick was to nine cities will have over 20 million each. anticipate the important shifts from mainframe Tokyo already has 35 million — more than all to distributed computing, and from outsourcing of Canada has — even though Japan’s overall to offshoring, etc. Here’s an analogy: Being population is starting to decline. These able to disaggregate a shaft of light into its megacities, and even smaller ones (China various sub-frequencies and colours — as a already has over 125 cities with more than prism does — offers a more valuable insight one million people) face huge concerns over than merely seeing the light itself. pollution (especially particulate emissions) and access to clean water, energy, sanitation McCarthy Tétrault Notes: and transportation. Sadly, for many millions of people in Asia and Africa, the urban The Clean Tech Wave environment currently means slums. Clean tech holds the promise of a much brighter Another tech-driven wave of innovation is future for these urban environments. breaking over the economy, and lawyers —

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Clean Tech Subsectors Cleaner Energy

A number of different technologies and For most people, the touchstone of clean business lines collectively make up clean tech is cleaner power. And indeed, clean tech. The major ones are water purification tech encompasses investing in ‘alternative’ and wastewater treatment, energy and energy sources (think wind power farms and efficiency, green buildings and pollution biomass fuels such as ethanol) and more abatement. To get a feel for a few of the sensible ways of managing the true costs players in this area, consider some of the from our existing, dirtier energy sources companies in which XPV Capital, a Toronto- (think carbon emission trading credits). based venture capital fund focusing on clean tech investments, invests. In terms of alternative energy, consider a few of the investments made by One such portfolio company is EnviroTower, Vancouver-based Ventures West, one of which makes advanced cooling systems Canada’s leading venture capital funds. for office towers that reduce the need Vancouver has been a hive of activity in for expensive and harmful chemicals. the fuel cell space, with companies such as XPV has also invested in Pionetics, which Ballard Power and Cellexpower — just two is developing technology for residential of many companies based there. A current water purification that employs an ion- Ventures West investee is Angstrom Power, exchange membrane device. A huge market a company developing micro-sized fuel exists for these greener water treatment cells for powering smaller devices such as systems. China alone plans to spend about cell phones. Chrysalix, another clean tech $20 billion in wastewater treatment over fund, also invested in Angstrom Power. the next decade. But frankly, anywhere is a For a more mature BC-based clean tech good market for cheaper, cleaner water — company, consider Victoria-based just remember the tragedy with dirty water Carmanah, a leader in developing solar in Walkerton, Ontario. powered LED lighting; Carmanah is listed on the TSX. Another clean tech fund is Investco Capital. They are an investor in BullFrog Power, The common denominator of all these which focuses on bringing clean electricity companies is that they are developing onto Ontario’s power grid, and selling it innovative energy-related technologies to to environmentally conscious consumers, replace existing dirtier products or which is a very interesting business model. processes. Or they are producing products (such as sophisticated software systems)

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 that implement energy conservation (such A Role for Canada as energy use metering and time-shifting) so that certain energy-intensive activities We are well placed to participate fully can be moved to off-peak hours. in the clean tech revolution. Canada has fine universities and a good group of Alternative energy producers are another entrepreneurs who are committed to clean example. For instance, wind energy tech initiatives. However, we will also need capacity in Canada grew by more than solid doses of enlightened public policy and 100 per cent last year, to about 1,588 creative public/private collaboration, such as megawatts. Estimates project that this the one that was implemented in downtown figure will reach 10,000 megawatts by Toronto - a building cooling system for all the 2015. If you visit Prince Edward Island major office towers powered by circulating (which is host to a large wind power cold water from Lake Ontario. The project research facility located on the windswept cost about $500 million, but it is paying large northwest corner of the island), you will dividends in both reducing ongoing costs and find that the souvenir shops sell just about cutting down on greenhouse gas emissions. as many fridge magnets with wind turbines on them as ones with lighthouses. Wind Individual Canadian businesses and power is a key plank in PEI’s objective organizations also have a role. The University of obtaining 15 per cent of power from of British Columbia (UBC), for example, renewable resources by 2010. While PEI recently undertook a major energy audit. is a small province, it is clearly a harbinger As a result, UBC implemented a range of of a clean tech future. measures that, while requiring significant upfront investment, are producing impressive Moreover, wind farms in PEI create demand savings. Furthermore, these measures are for the innovative technology of Xantrex reducing UBC’s footprint on the environment, Technology, a company traded on the a development for which we can all be TSX. Xantrex makes inverters, high-tech thankful. The University of Toronto is in devices that transform the direct electrical the process of a similar exercise. Individual current generated by wind turbines and companies within corporate Canada need solar panels into alternating current that to be close behind. can be transmitted over the electricity grid. This is yet another important — and Legal Services for Clean Tech Canadian — component of the clean tech wave of innovation. An estimated $10 billion will be invested in clean tech between 2005 and 2009. This volume of activity will require material

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 amounts of legal services. These include From Success to Significance intellectual property protection to secure the value of the innovations in technologies Clean tech has an additional attraction as diverse as information technology, beyond encompassing interesting work for biotechnology and mechanical and lawyers. Clean tech allows lawyers to work electrical devices. Other required legal on projects that do significant good for the services include tech commercial work environment. For many lawyers who have to exploit the technology and corporate built successful practices and are currently finance to facilitate the funding process, on the top of their game technically and in from early stage venture investment to the marketplace, clean tech allows them to initial public offerings. Regulatory work move from success to significance. In other will also arise, such as helping clean tech words, clean tech represents a fortuitous companies to navigate the complex confluence of practising interesting law labyrinth of public policy rules and and saving the world. regulations relating to the environment or land use planning for projects such as wind Contact: power turbine farms. Other required legal George S. Takach in Toronto at services include project work, such as [email protected] putting together complex arrangements between alternative energy providers and US: traditional utilities. And these services 1.5 Trillion Reasons Why involve assisting in integrating new clean Climate Change Impacts Are technologies and companies into the Material Disclosure traditional power generation system, and likely revising this traditional system at In our previous column we looked at the the same time. emergence of clean technology as an investment category and business response Put another way, a law firm that wants to to climate change. This month we continue excel at clean tech work will need to have our analysis with a look at how climate solid expertise in each of these areas. Just change is influencing corporate governance as importantly, the law firm will need a and disclosure. management structure that is able to co- ordinate and integrate its clean tech Representing more than US $1.5 trillion in service offering into an efficient and assets, leading US and European institutional sensible value proposition. investors have filed a petition asking that the US Securities and Exchange Commission (SEC)

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 require publicly traded companies to assess A broad coalition of 22 petitioners has and fully disclose their financial risks from formally asked the SEC’s Division of climate change. These institutional investors Corporation Finance to immediately begin include dominant managers such as California’s “closely scrutinizing the adequacy of Public Employees’ Retirement System (CalPERS) registrants’ climate disclosures under and State Teachers’ Retirement System existing law.” This coalition includes US (CalSTRS), which collectively manage more state officials with regulatory and fiscal than $400 billion in assets. management responsibility, environmental groups and corporate governance groups. McCarthy Tétrault Notes: This group of investors appears to have co-ordinated an aggressive strategy to The petition asserts two key points: force enhanced disclosure and corporate (i) that under existing law, corporations are governance on these climate change issues. obligated to consider and disclose the risks It seems reasonable that this expectation and opportunities they face in connection of enhanced disclosure will broaden and with climate change as they are material gain traction in the regulatory and to shareholder investment decisions; and enforcement arenas. (ii)that climate change must be assessed by all companies to determine its business and The petition further states that climate financial implications and to determine if change can affect corporate governance such current disclosure obligations do not and performance in ways ranging just apply to the energy or carbon-intensive from physical damage to facilities and industries. For example, in the insurance increased costs of regulatory compliance, industry, a major US insurer, which insures to opportunities in global markets for one in eight homes in the US and reported climate-friendly products or services that over $4 billion in losses from Hurricanes emit little or no carbon. These types of Katrina and Rita, did not mention climate risks, according to the investors’ petition, change at all in its latest annual filing. fall squarely into the category of material information that companies must disclose If the petition’s assertions are correct and under existing corporate governance no new regulation is required, then publicly practices and disclosure regulation traded companies will have less time than in order to give shareholders a full and expected to bring their corporate governance fair picture of corporate performance procedures and climate change related and operations. disclosure into compliance. Additionally, the window for plaintiff and class-action This may require disclosure of the following securities litigation may be opening sooner information: than expected.

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 • physical risks associated with climate Climate change and sustainability have change that are material to operations been at the forefront of news over the or financial condition; past year, and public pressure for improved environmental stewardship continues to • legal proceedings relating to climate mount. The implications of these changes change; and for business are far-reaching and will have a dramatic impact on business, as legal and • financial risks and opportunities regulatory changes related to sustainability associated with present or probable and climate are only going to increase. greenhouse gas regulation. Business leaders continue to appreciate that certain of these changes will be driven One regulatory impact that deserves by demands from shareholders and the consideration is greenhouse gas emission public. For example, in the 2007 proxy reduction. Regulation may include emission season, over 45 global warming/climate caps and reductions, as well as carbon change resolutions were filed by investors taxes or carbon trading markets. Even in North America. companies that do not participate directly in any carbon trading markets will be For business leaders of companies in carbon- affected by the price of carbon as it intensive industries, such as utilities in affects energy prices and creates other regions where coal-fired plants are implications in a carbon-constrained commonplace, the implications of this economy. For example, under the European evolving new reality will be realized sooner Emission Trading Scheme, the price of a rather than later. For example, the New York tonne of carbon has ranged from a high Attorney General has recently opened an of 31 euros to a low of 2 euros, although investigation of five major utility companies long-term trends are expected to be less regarding whether their plans to build coal- volatile. Understanding carbon-trading fired power plants pose undisclosed financial and emission-reduction regulatory regimes risks that should be disclosed to investors. is expected to be of similar importance The investigation is based on New York as understanding tax implications on a securities law and appears to be one of the business, as it will be a key economic first, if not the first, securities investigation driver of the costs of production in a into climate change disclosure by public carbon-constrained economy. The impacts companies. of carbon trading and emission reduction regimes will be discussed in more detail As part of the investigation, subpoenas in the next issue of the TLQ by Cappone were also issued under New York securities D’Angelo and Anne-Marie Sheahan. laws. The letter stated, in part, “Any one of the several new or likely regulatory

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 initiatives for CO2 emissions from power Canada: plants — including state carbon controls, Canadian CEO Council Consensus: EPA’s regulations under the Clean Air Act, Climate Change Is Top Issue or the enactment of federal global warming legislation — would add significant cost The Canadian Council of Chief Executives has declared that sustainable development is to carbon-intensive coal generation.” The letter also stated, “Selective “the most fundamental challenge facing the disclosure of favorable information or world today, and ... climate change represents omission of unfavourable information the most pressing and daunting issue” facing concerning climate change is misleading.” business, government and the public. McCarthy Tétrault Notes: This petition represents a clear and unambiguous signal from large investors: This declaration results from an They consider the analysis of impacts to a unprecedented consensus between Canadian business resulting from climate change to businesses in a variety of industries including be material, and they are prepared to high-tech (e.g., IBM), energy producers and engage all of the regulatory tools at their distributors (e.g., Imperial Oil, Petro-Canada, disposal to ensure consistent, timely and Bruce Power) and financial institutions appropriate disclosure. These US examples (e.g., RBC). The 33 companies and CEOs that are of interest to officers and directors of participated in this task force and endorsed Canadian public companies as they are a the declaration are listed in full on the next sign of things to come. page. They represent just over $800 billion in annual revenue. Contact: Cheryl L. Slusarchuk in Vancouver at The CEOs are confident that Canada [email protected] can become a leader in this area. Below

is an extract from the CEOs’ declaration inviting the federal and provincial governments to engage with business in shaping public policy and setting out potential opportunities for doing good business, which includes making money:

We know enough about the science of climate change to recognize that aggressive global action is required. The scale of the challenge is enormous, but it offers immense opportunities for

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Co-Counsel: Technology Law Quarterly Volume 3, Issue 3 Canada. We share the goal of slowing, see climate change and sustainable stopping and reversing the growth of development as major economic global greenhouse gas emissions (GHG) opportunities. The key is to shape over the shortest period of time that is public policies that reinforce both the reasonably achievable. desire of individuals and companies to reduce their environmental impact and Canadians want to do what is right for their ability to invest their money in the environment, and they want to do the new technologies, products and so in a manner that will add to their processes that will make the greatest quality of life. As business leaders, we difference domestically and globally.

Canadian Council Task Force

General Electric Canada Direct Energy Ultramar Ltd. Pengrowth Management Limited Petro-Canada SNC-Lavalin Group Inc. Canadian Oil Sands Limited Teck Cominco Limited Manulife Financial NOVA Chemicals Canadian Council of Chief Executives Coril Holdings Ltd. Palliser Furniture Ltd. Royal Bank of Canada Power Corporation of Canada Bowater Incorporated Edco Financial Holdings Ltd. James Richardson & Sons, Limited Alcan Inc. Amaranth Resources Limited GreenField Ethanol Inc. TransAlta Corporation IBM Canada Ltd. Stone Creek Properties Inc. Suncor Energy Inc. The Home Depot Canada Canadian Pacific Railway Company E.I. du Pont Canada Company Linamar Corporation Agrium Inc. Bruce Power Dow Chemical Canada Inc. Imperial Oil Limited

Contact: Cheryl L. Slusarchuk in Vancouver at [email protected]

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