Changes to California’s Privacy Law – Consumer Privacy Rights Act

On November 3, 2020, California voters approved the California Privacy Rights Act (CPRA), which replaces the California Consumer Privacy Act of 2018 (CCPA).

The CPRA expands consumers’ rights regarding protection of personal information. Companies collecting personal data should review the changes to ensure compliance. Indeed, we anticipate that enforcement of these laws will drastically increase when the CPRA comes into effect

For many companies, the CPRA may not directly apply, but companies may be contractually obligated to comply with the law if they conduct business with large tech firms.  As as a result, it will be prudent for many companies to comply in order to ensure they can continue to service their clients.

Major changes include:

1. Enforcement

The CPRA creates the California Privacy Protection Agency, a government body tasked to make the regulations and enforce the CPRA. It is predicted that the CPRA will increase the level of enforcement because it is partially funded by the fines.

2. No more warnings

The new law eliminates the 30-day cure period provided by the CCPA. The CCPA provided notices to businesses not complying with the law and allowed them to fix the violations within 30 days without having to pay fines. The notice and cure period no longer exist with the CPRA.

3. Sensitive Personal Information

The CPRA creates a new subcategory of personal information, which includes information such as biometric information and contents of e-mails and texts. Collection of sensitive personal information compels additional disclosure, opt-out and use requirements.

4. Expansion of Consumer Rights

Consumers now have the right to opt-out of businesses sharing and selling their personal information. Under the CCPA, consumers only had the right to opt-out of the sale of their personal information. Consumer also have the right to request businesses to delete their personal information and businesses must notify third parties to delete the personal information as well.

The CPRA will become effective on January 1, 2023 with a look back period of 12-months so businesses will need to comply by January 1, 2022.

The CPRA will likely be the foundation for privacy legislation in other states and on a federal level. Similar laws will pass in the near future in many states including Washing and New York and on a federal level in both the US and Canada.

In this constantly changing regulatory environment, it will be critical to review your data collection practices and Privacy Policy to ensure that your company remains compliant and to avoid enforcement actions.

Expedited Trademark Examinations in Canada

The Canadian Intellectual Property Office (CIPO) recently announced that it will be accepting requests for expedited examination of trademark applications along with other measures to speed up the trademark registration process in Canada. Before the recent announcements, CIPO took approximately 24-30 months to issue an examiner’s report (also called an office action). The new measures are expected to greatly reduce delays in Canada. 

Expedited examinations may be requested by an applicant if one of the following conditions are met:

1. a court action is expected or underway in Canada with respect to the applicant’s trademark in association with the goods or services listed in the application.
2. the applicant is in the process of combating counterfeit products at the Canadian border with respect to the applicant’s trademark in association with the goods or services listed in the application;
3. the applicant requires registration of its trademark in order to protect its intellectual property rights from being severely disadvantaged on online marketplaces; or
4. the applicant requires registration of its trademark in order to preserve its claim to priority within a defined deadline and following a request by a foreign intellectual property office.

Other measures to reduce delays in trademark registration include:

1. examiners providing fewer examples of goods and services that would be considered acceptable in examiner’s reports;
2. faster examinations of applications with goods and services from CIPO’s pre-approved list of goods and services; and
3. reduced number of examiner’s reports for each application and issuance of refusals in a timely manner. 

If you have a pending trademark application that has yet to be approved and you believe you meet one of the four conditions above, you may wish to request expedited examination for your application. If a request for expedited examination is accepted, the application will be examined as soon as possible. 

Please reach out to a member of Voyer Law’s IP team if you would like to request expedited examination for your trademark application.

Canada’s Start-up Visa Program

To attract foreign entrepreneurs to work in Canada, Canada has implemented the Start-up Visa Program. The program gives qualified business owners and their families an expedited track to permanent residency if they can meet the requirements.

To be eligible for the Start-up Visa Program, you must (1) have a qualified business, (2) obtain a letter of support from a designated organization, (3) meet the language requirements, and (4) have enough money to settle in Canada. 

1.         To have a qualified business, you must show that you own more than ten percent of the voting rights attached to all company shares. Additionally, applicants and the supporting designated organization must jointly own at least fifty percent of the voting rights shares. Upon receiving permanent residency, you must incorporate your business in Canada, an essential part of your business must take place in Canada, and you must provide active management of your business from within Canada.

2.         Applicants must also obtain a letter of financial support from a designated organization. These can be venture capital funds, angel investor groups, and business incubators that are pre-approved by the Canadian Government. You can find a list of these organizations here (https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/start-visa/designated-organizations.html). The letter of support: 

1. describes the business structure; 
2. identifies the applicant and their role in the business;
3. describes the nature of the business;
4. confirms the applicant has control over the company’s intellectual property;
5. specifies the amount of the investment; and 
6. that the organization performed a due diligent assessment of the applicant.

Lastly, the designated organization will send a commitment certificate directly to Citizenship and Immmigration Canada (CIC) that outlines its financial support. The CIC will use both the letter of support and the commitment certificate to assess your application.

3.         To be eligible to apply, you must also take a language test from an approved agency. To be considered for the program, you be able to show minimum proficiency in speaking, reading, writing, and listening in either English, French, or both languages. Upon receiving a score above Canadian Language Benchmark 5, an applicant should submit the results along with their application.

4.         Finally, applicants will not receive financial support from the Canadian Government, so they must provide proof of sufficient funds. You must show that you have enough money to support yourself as well as any dependents you plan on bringing to Canada with you. There are minimum requirements but the Canadian Government recommends that any applicant brings as much money as possible with them. 

If an applicant meets the eligibility requirements and submits and pays for a successful application, the process should take approximately twelve to sixteen months to complete. However, interested applicants can also apply for a temporary work permit while their start-up visa application is pending so they can start building their business in Canada. There are more specific requirements for such a work permit, but an applicant must have already received a letter of support from a designated organization. Finally, temporary work permits can typically be complete in a few weeks but times can vary depending on the country and other circumstances (Covid-19). 

If you can meet the criteria, the Start-up Visa Program can be an excellent opportunity to move your business into Canada while concurrently obtaining permanent residency.

SAFEs and the BC EBC Tax Credit

SAFEs (Simple Agreement for Future Equity) are used by early stage companies to raise investment without requiring the parties to determine the company’s value.  Instead, future events determine the company’s value and prompt conversion of the SAFE into equity.  As of March 2, 2019, SAFEs are now eligible for the British Columbia Eligible Business Corporation (EBC) tax credit, subject to certain requirements being met.

The EBC tax credit, in simple terms, is a 30% BC government tax credit received by investors for investments made in small businesses operating in qualifying industries in BC.  In order for an investor to receive the tax credit: the company must be operating in a qualifying industry; registered for the EBC credit; the investment structure must qualify; and funds must be allotted and available to the company for issuance of the credit.  Industries qualifying for the credit are quite broad and include: manufacturing; research and development of new technologies; destination tourism; digital media products; clean tech and advanced commercialization.  BC also offers a similar tax credit for Venture Capital Corporations, which operates under the same overall program.

SAFEs typically contain clauses rendering them ineligible for the EBC tax credit and the BC government did not originally allow SAFEs to be used in tandem with the EBC tax credit.  This posed a significant problem for small business that raised money with SAFEs.

While SAFEs are now eligible for the EBC tax credit, they need to be altered to remove clauses that make them ineligible.  While the alterations required depend largely where the SAFE documents originate, be it from Y Combinator or a SAFE drafted by a Canadian law firm, clauses that need to be removed include:

• fixed term lengths of less than 5 years (admitted, more of a Convertible Note clause);
• repayment prior to 5 years from the date of investment;
• interest features (eligible SAFEs cannot operate as loans, again, more of a Convertible Note clause);
• assignment clauses (except in very limited circumstances); and
• liquidity and dissolution clauses that either allow for certain priority or preference over shareholders.

There are two ways to fix these issues:

• redraft the SAFE to make it compliant; or
• have each SAFE investor waive in perpetuity all rights that would make the SAFE ineligible.  

The first approach is preferable as a wavier may cause unforeseen problems if the SAFE is not drafted with a wavier in mind and may inadvertently cause an investor to forgo important negotiated terms. 

Nearly all of the SAFEs we review are ineligible for the EBC tax credit so investors should be wary if a company claims that their SAFE is EBC eligible.  Furthermore, as EBC program funds can run out every year, we recommend planning ahead and making sure that all your documents are in order so the tax credit is not missed out on.