Outsourcing: Canada Overview

Michael Decicco and Wesley Ng co-authored “Outsourcing: Canada Overview” for Practical Law Review, published by Thomson Reuters. The practice note provides a high level overview of outsourcing in Canada, including topics such as legal and regulatory requirements, processes and formalities required for transferring assets and employees, and data and privacy protection, among other considerations with respect to different types of outsourcing. To access a copy of the practice note, click here.

IIROC releases guidance regarding dealer outsourcing

Earlier this week, the Investment Industry Organization of Canada released guidance relating to the outsourcing arrangements commonly entered into by investment dealers.

Generally, the notice summarizes existing requirements and guidance relating to entering into and maintaining outsourcing arrangements, describes the types of business activities that may and may not be outsourced and sets out IIROC's expectations concerning due diligence procedures that must be undertaken by dealers prior to outsourcing business activities.

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Open source software in the M&A context

While open source software (OSS) has been around for decades, companies are just starting to appreciate the importance of focused OSS due diligence in the M&A context. In this context, purchasers are most concerned with unknowingly inheriting the target’s OSS issues, such as reciprocal licences or deficient code, or overvaluing the target based on misinformed assumptions of the proprietary nature of its software. This is particularly worrisome considering that less than 50% of companies have OSS governance or monitoring policies and it is estimated that more than 50% of source code is licensed pursuant to unknown or reciprocal licences. Exacerbating these concerns is the fact that most companies do not know what is in their source code, despite being under the assumption they do.

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Law Society of B.C.'s Report to stay afloat of cloud computing

The Law Society of British Columbia’s Cloud Computing Working Group issued its Final Report on Cloud Computing on January 27, 2012, amending an earlier consultation report approved by the “Benchers” on July 15, 2011. The report is prepared in response to the increasing use by lawyers of cloud computing technology to store and process records and conduct due diligence. In its report, the Working Group outlined due diligence guidelines, best practices and also made a series of recommendations to modernize the Law Society’s Rules.

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2011 in Review - Top 10 Technology & IP Law Developments

The arrival of 2012 marked the end of a year filled with numerous developments in technology and IP law. Taking a cue from the Canadian Communications Law blog, we’ve decided that this would be an excellent time to reflect on the past year and review some of its more notable developments. To that end, we’ve put together a list of the top 10 technology and IP law developments from the past year.

Without further ado, here are our picks for the top 10:

  1. Court of Appeal recognizes reasonable expectation of privacy in contents of work computer - In R. v. Cole, a teacher discovered with nude images of a student on his work laptop was found by the Ontario Court of Appeal to have a reasonable expectation of privacy with respect to his personal files on that laptop.
     
  2. No liability for defamation for basic hyperlinks, says Supreme Court - In a decision that came as a relief to bloggers, tweeters, webpage owners and other providers and hosts of internet content, the Supreme Court of Canada clarified in Crookes v. Newton that merely providing hyperlinks to defamatory content will not lead to liability for defamation.
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Cloud computing and Canadian federally regulated financial institutions

Wesley Ng and Stuart Carruthers  -

Cloud computing has grown significantly in the last few years. A Gartner Executive Program survey of more than 2,000 Chief Information Officers (CIOs), representing 50 countries and 38 industries, found that cloud computing is the number one technology priority for 2011. Fully 43% of the CIOs expected that a majority of their IT will be running “in the cloud” within four years. In its updated June 2011 forecast of Information Technology spending, Gartner stated that cloud computing expenditures are likely to rise by 16-20% per year through 2015, representing 4% of global IT spending by the end of that period. Richard Gordon, research vice president at Gartner, noted that expenditures for cloud computing services grew four times faster than overall IT spending.

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Choice of Law Clauses: Court of Appeal applies Arthur Wishart Act to franchisees outside Ontario

In the recent case of 405341 Ontario Limited v. Midas Canada Inc., the Ontario Court of Appeal affirmed that the Arthur Wishart Act applies to franchisees outside Ontario where parties choose Ontario law to govern their franchise agreement. Stikeman Elliott partner Wesley Ng provides more comprehensive coverage of the case in a Slaw column published today.

Accepting service providers' standard service descriptions risky

Stikeman Elliott Partner Wesley Ng's column in Slaw this month considers the perils of relying on service providers' standard service descriptions when engaging in outsourcing activities. According to Mr. Ng,

Ultimately, the customer needs to dedicate sufficient resources to ensure a full appreciation of the services that are being contracted (including service levels and the consequences of any service level failure). Generally, this is a two-step process involving:

  1. understanding the organization’s needs without reference to the service providers’ services; and
  2. understanding any discrepancy between the organization’s needs and what the service provider is willing and able to provide.

SCC rejects doctrine of fundamental breach in context of exclusion clauses

In an important ruling arising out of a disputed public procurement process, the Supreme Court of Canada has unanimously rejected the doctrine of fundamental breach in the case of Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), substituting a three-stage test of the enforceability of an exclusion-of-liability clause that considers (i) whether the clause actually applies to the type of breach that is alleged, (ii) unconscionability, and (iii) public policy.

However, before anyone celebrates the end of the ambiguity that has pervaded this part of Canadian law since the split decision in Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426, it must also be reported that the Court split five to four on the application of its new three-stage test to the facts. The distinction between the majority and minority reasons will be of interest to those drafting or negotiating exclusion clauses, particularly in the context of a request for proposals (RFP) or tendering process.

For more information on the case, see the following Stikeman Elliott Litigation Update of March 2010.

Government overrules CRTC, declares Globalive Canadian

Industry Minister Tony Clement announced today that he was overruling the Canadian Radio-television and Telecommunications Commission (CRTC) and allowing Globalive Wireless Management Corporation (Globalive) to become the fourth national wireless carrier in Canada. The CRTC had previously declared that Globalive was not eligible to operate as a telecommunications carrier in Canada because it was not Canadian-controlled, relying on the fact that almost all of Globalive’s financing had come from an Egyptian company. Clement acknowledged a foreign influence over Globalive, but found that control was in Canada. The majority of Globalive’s voting shares are held by Canadians, and its board is not foreign-controlled. Clement later said that this decision did not indicate an intention to change Canada’s foreign ownership rules for wireless carriers.

CRTC follows the money, concludes Globalive does not satisfy Canadian ownership and control requirements

Gregory Kane Q.C., Sean Vanderpol and Colin Yao

Canada's federal telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC or Commission), has recently released the stunning decision that Globalive Wireless Management Corporation (Globalive) is not currently eligible to operate as a telecommunications common carrier (TCC). According to the CRTC, Globalive, which recently purchased 30 advanced wireless spectrum licences at auction from Industry Canada, may not act as a TCC because it does not meet the requirements set out in section 16 of the Telecommunications Act (the Act).

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Arizona Supreme Court finds metadata subject to public records request

On October 29, 2009, the Supreme Court of Arizona overturned the Court of Appeals’ decision in the e-discovery case of Lake v. City of Phoenix, 222 Ariz. 547, 218 P.3d 1004 (2009). It held that when a public entity maintains a public record in electronic format,then the electronic version, including any embedded metadata, is subject to disclosure under public records laws.

The public record request arose out of the underlying employment discrimination litigation between the city and David Lake, a Phoenix police officer, who sought the production of metadata associated with notes he suspected were backdated. The request was denied by the city, who contended that the metadata was not a public record.  The refusal was upheld on appeal.

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CRTC sets Canadian "net neutrality" framework

Canada's federal telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), has recently released a regulatory policy decision clarifying its legislative authority within Canada's Telecommunications Act to police discriminatory internet traffic management practices by ISPs and its position in favour of net neutrality. In addition, this decision also enhances the protection of personal information collected by ISPs by seeking to “impose a higher standard than that available under PIPEDA in order to provide a higher degree of privacy protection for customers of telecommunications services.”

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OSFI releases revisions to guidelines governing outsourcing by federally-regulated entities

Martin Langlois

On March 11, 2009, the Office of the Superintendent of Financial Institutions Canada (OSFI) released the first revision to its Guideline B-10, Outsourcing of Business Activities, Functions and Processes, since December 2003. As summarized in the OSFI letter that accompanies it, the Guideline - which sets out OSFI's expectations with respect to outsourcing by federally-regulated entities (FREs) - is being revised in 7 significant respects:

  1. Section 2 of the Guideline now provides that outsourcing arrangements obtained by the FRE "as the result of an acquisition" are expected to comply with the Guideline at the first opportunity, e.g. when the relevant contract, agreement or statement of work is substantially amended, renewed or extended.
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