Law Times

Law Times • June 4, 2012 Businesses jittery as new law to take effect next year Anti-spam legislation FOCUS BY JULIUS MELNITZER For Law Times Commerce Protection Act, wouldn't come into force until 2013. "Clearly, the government is I anti-spam law, the Electronic n late April, Industry Minister Christian Paradis announced that Canada' s long-awaited attempting to address the many concerns expressed by stakehold- ers about this new law, which pro- vides for significant administra- tive monetary penalties and a pri- vate right of action," writes Bernice Karn of Cassels Brock & Blackwell LLP in the April 2012 edition of the firm' been With the publication of the Canadian Radio-television and Telecommunications Commis- sion' It's not that there has no s monthly report. progress recently. tection regulations earlier this year, anti-spam legislation took a significant proclamation. " leap forward to of the Industry Canada regula- tions, a revised version of which is expected shortly, and the selec- tion of a vendor to run the spam reporting centre contemplated by the act," says David Elder of Stikeman Elliott LLP. The business community, All that remains is finalization however, will be disappointed by the regulations. "The final regulations omit some important clarifications of the language in the [act], fail to provide exemptions for certain businesses and behaviour that should not be caught by the leg- islation, and continue to impose unworkable and unnecessary requirements disproportionate impact on tech- nologies such as text messaging, says Elder. Indeed, the law in its present form may be the world's most s electronic commerce pro- promotional activities, say in the case of a pharmaceutical company that sends out invitations to a din- ner with a lecture series for physi- cians," says Elder. To be sure, there are impor- "The grey area is in general tant similarities between the Canadian legislation and U.S. law in the sense that their pur- poses are the same. Both laws seek to protect consumers from misleading information, them the right to decline receipt of unwanted e-mails, and reduce the costs for businesses that have to manage an influx of spam. But the fact remains that the a draw and the business then adds you to their e-mail list," says Elder. "But whether that constitutes con- sent or implied consent under the law isn't at all clear. give of the act is that Canada may be at a competitive disadvantage as a venue for the nascent cloud- computing industry. The reason is that although the act exempts telecommunications companies, it doesn't do so for data centres. Information technology One of the significant impacts " U.S. law is opt-out legislation whereas the Canadian act involves an opt-in principle. At the same time, the Canadian act applies not only to business-to-consumer messages but also to business-to- business communication. Otherwise, unlike the American legislation, Canada's comprehensive attempt to restrict unsolicited e-mail doesn't bode well for Canadian business- es interested in taking advantage of the economic opportunities cloud computing presents. "The principal difficulty is the extraterritorial effect of the law," s most statute applies not only to e-mail but also to other forms of electronic communications, including instant and text mes- saging and all social media. The act has extraterritorial effect, meaning it applies whenever a computer located in Canada sends messages anywhere and regard- less of the destination. "We have a number of commercial electronic American clients who have elect- ed not to come to Canada until the dust settles on this legisla- tion," says Wendy Gross of Osler Hoskin & Harcourt LLP. The core difficulty under the says Barry Sookman of McCarthy Tétrault LLP. The upshot is that if a cloud pro- vider wanted to set up in Canada, any transmission from that cloud — whether inside or outside the country — would become subject to the legislation' closure obligations. "That includes not only the s consent and dis- cloud operators but their custom- ers, wherever they may be, that may have a " comprehensive attempt to restrict unsolicited e-mail. Unlike any other anti-spam legislation, the act isn't limited to messages that may be harmful in the sense that they contain some element of fraud or deceit. Rather, it prohibits the sending of any commercial elec- tronic message to an electronic address without the recipient' prior consent where the purpose of the message is to encourage par- ticipation in a commercial activity. "The big-picture concern for business is that the law goes too far and overregulates by catching what many consider to be legitimate electronic mar- keting initiatives," says Elder. " message actually means." For example, a business that commercial electronic Canadian law for businesses involved in electronic marketing is that the consent provisions are quite rigid. The Canadian act is very clear that consent is neces- sary before someone can send a commercial electronic message. That means a person can't even send an e-mail asking for consent. By contrast, the U.S. law allows an initial mailing as long as it contains the required information and has a simple unsubscribe function. Consent under the Canadian s act is implied when the sender and recipient have had an exist- ing business or non-business relationship, both defined by the statute, in the past 18 months. Where no such relationship exists, senders must obtain the express consent of the recipient by setting out the purpose for which they're seeking it, informa- tion identifying the person ask- ing for it, and other information required by regulation. Indeed, the act doesn't allow Aggravating the situation is the continuing lack of clarity about what invites clients to a basketball game or a seminar may or may not be sending a commercial electronic message if it makes the offer electronically. for inferring consent for a solicita- tion from publication of an e-mail address even if it would be reason- able to assume the message would be of interest to the individual or an organization. "Most people, for example, would say that you have given implied consent when you put your business card in a fish bowl at a trade show by way of entering Untitled-1 1 www.lawtimesnews.com 12-01-23 9:05 AM Sookman. "The difficulty is that no one will want to be at a disad- vantage in sending out electronic messages simply because the serv- er happens to be in Canada." Sookman isn't suggest- ing that Canadian companies " says immediately to get express con- sents where they haven't done so already, so there will be no ambiguity about dealing with customers and prospects," says Richard Corley of Blakes. Non-compliance isn't a viable "Businesses should set out option because the legislation has teeth. Offenders are liable to admin- lawyers say the convergence of the newest popular paradigm in information technology and what may be the world' Businesses are concerned 'the law goes too far and overregulates by catching what many consider to be legitimate electronic marketing initiatives,' says David Elder. shouldn't have to comply with anti-spam laws. "I'm merely saying that extraterritorial impact shouldn't be so broad as to catch foreign companies who are using a server in Canada as a conduit," he says. Quite apart from the restric- the istrative monetary penalties of up to $1 million for individuals and up to $10 million for corpo- rations. Officers, directors, and agents are liable if they directed, authorized or participated in the violation. A due diligence defence is available. The CRTC will determine whether a violation has occurred and the amount of the penalty. The legislation provides for appeals to the Federal Court of Appeal. As well, the act provides for PAGE 11 tions, there are operational liabil- ity issues for service providers that wish to locate in Canada. "The law attaches liability to Christine Ing of Blake Cassels & Graydon LLP. "So service provid- ers who situate in Canada will have to ask themselves whether and to what extent they have to start policing their customers." But compliance can be a daunt- " notes ing proposition. The practical solu- tion, lawyers say, is proactivity. anyone who permits or aids a commercial electronic message to be sent, not just the sender, a private right of action for indi- viduals affected by offenders. These individuals may apply for a compensation order for actual loss, as well as a maximum of $200 daily for each contravention of the breached provisions with a limit of $1 million for each day on which a breach occurred. Officers, directors, and agents of the cor- poration are subject to the private right of action if they directed, authorized or participated in the contravention. As for prohibited activities that originate outside Canada, the act gives the country' commissioner the power to dis- close and share information with foreign states. LT s privacy When it comes to IP in Canada, We're Well Read Ridout & Maybee LLP: Editors of the Canadian Patent Reporter it all starts somewhere www.ridoutmaybee.com

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