Phase 2 of Canada’s Anti-Spam Legislation (CASL) relating to the installation of computer programs will come into force on January 15, 2015. Commonly referred to as the malware prohibition, CASL goes far beyond prohibiting malware and will impact companies that install computer programs even where there is no improper purpose. As a result, many businesses, including those outside of the software industry, will need to review their practices with respect to installing computer programs and develop compliance strategies in order to comply with this new legislation.
Subject to limited exceptions, CASL prohibits installing, or causing to be installed, a computer program (software) on another person’s computer system including a laptop, smartphone, tablet, gaming console or other connected device in the course of commercial activity without the express consent of the device owner or an authorized user (e.g., a family member or an employee).
While in some circumstances consent is presumed, in other circumstances, depending on the function of the computer program, additional notice and consent requirements must be met. On November 10, 2014, the Canadian Radio-television and Telecommunications Commission (CRTC) posted its first substantive guidance materials on the new provisions, which provide some insight as to the policy position the CRTC may take on its interpretation of the new requirements.
SCOPE OF COMPUTER PROGRAM PROVISIONS
CASL applies to computer programs that are both installed and caused to be installed on another person’s computer system. CASL does not apply, however, to programs or apps that owners or authorized users download on their personal devices such as computers or mobile devices or to updates they install for such programs, except where the software or the update includes functionality that the owner or authorized user would not reasonably expect. The CRTC guidance materials provide an example of the owner of a mobile device who goes to an app store to purchase and download an app. Since the owner is installing the app on his own personal device, CASL would not apply.
Moreover, CASL does not apply to offline installations such as CDs or DVDs purchased at a store, from which a person knowingly installs a computer program on their own device. Nevertheless, the CRTC has clarified that if the CD/DVD which is installed contains a concealed computer program that is automatically executed when the CD or DVD is inserted into the device, such installation is not exempt and the installer would be requested to obtain appropriate consent since in such case, the distributor or developer will have caused the software to be installed on the person’s device.
As is the case for the provisions of CASL dealing with the sending of commercial electronic messages, in order to obtain CASL-compliant express consent to install software, the person granting the consent must make a positive or explicit indication of consent. Therefore, in order to have valid express consent, an individual must take an active step to “opt in,” such as by checking a previously unchecked box. Express consent cannot be subsumed in or bundled with requests for consents for other purposes, such as in a licence agreement or terms and conditions of service.
Express Consent not Required in Certain Cases: Deemed Consent
CASL provides that consent is deemed to have been granted if the computer program is:
- A cookie (as long as it cannot carry a virus and install malware)
- HTML code
- An operating system (examples mentioned by the CRTC in its guidance materials include, among others, Microsoft Windows, Mac OS/iOS and Android)
- Any program that is executable through another that was already consented to
- A program installed by or on behalf of a telecommunications service provider (TSP) solely to protect the security of its network from a current and identifiable threat (note that automobile manufacturers, for example, are TSPs for the purposes of CASL when their vehicles include wireless telecommunications functionality)
- A program that is installed for the purpose of updating or upgrading a TSP’s network
- A program that is necessary to correct a failure in the operation of the computer system (e.g. bug fixes)
- A program that is installed for the purpose of updating or upgrading a program for which consent for such update or upgrade has previously been obtained.
Basic Consent Requirements
If the computer program to be installed on another person’s computer device is not exempt (i.e. cases where consent is not deemed) and such installation is in the course of a commercial activity, then prior to installing such software the installer must set out clearly and simply:
- The function and purpose of the computer program that is to be installed
- The purpose for which the consent is being sought
- The person who is seeking consent (e.g., the name of the person seeking consent or if consent is sought on behalf of another person, that person’s name)
- If consent is sought on behalf of another person, a statement indicating the person who is seeking consent and the person on whose behalf consent is being sought
- The mailing address, together with one of a telephone number providing access to an agent or voice message system, an email address or a web address of the person seeking consent
- A statement that the person whose consent is being sought may withdraw their consent at any time.
We note that the burden of proving consent is on the person claiming to have obtained consent.
Heightened Consent and Notice Requirements for Programs that Perform Certain Functions
Additional information must be provided if the person seeking consent knows and intends that the computer program will cause the computer system to operate in a manner that is contrary to the reasonable expectations of the owner or authorized user, and the computer program performs the following types of functions:
- Collects personal information stored on the computer system
- Interferes with the owner’s or an authorized user’s control of the computer system
- Changes or interferes with settings, preferences or commands already installed or stored on the computer system without the knowledge of the owner or an authorized user of the computer system
- Changes or interferes with data that is stored on the computer system in a manner that obstructs, interrupts or interferes with lawful access to or use of that data by the owner or an authorized user of the computer system
- Causes the computer system to communicate with another computer system or other device without the authorization of the owner or an authorized user of the computer system
- Installs a computer program that may be activated by a third party without the knowledge of the owner or an authorized user of the computer system.
If the computer program performs any of these functions, the person seeking consent must also, prior to the installation of the computer program, clearly and prominently (and separately from a licence agreement):
- Describe the program’s material elements that perform the function or functions, including the nature and purpose of those elements and their reasonably foreseeable impact on the operation of the computer system
- Bring those elements to the attention of the person from whom consent is being sought
- Obtain an acknowledgment in writing that the person understands and agrees that the program performs the specified functions.
By way of example, the CRTC guidance materials make reference to someone developing a gaming app for a smartphone or tablet that contains functionality to collect information from the GPS, camera and microphone that would not normally be expected by the user. While CASL may not require the installer to seek consent when the owner or authorized user of the device self-installs the gaming app on their device, the installer would be required to disclose the locator feature as it would not be reasonably expected. In this situation, this functionality, as well as the purpose for which the game collects that information, would need to be disclosed to the owner or authorized user and this description would need to be provided apart from the terms and conditions or end-user licence agreement.
It should be noted, however, that the heightened information requirements set out above do not apply to computer programs that only collect, use or communicate transmission data.
‘UPDATES’ AND ‘UPGRADES’
Software updates and upgrades generally bring the software up to date and improve its characteristics. Therefore, updates and upgrades will often have new features and, as such, consent will be required for them to be installed on another person’s computer device. For this reason, if a computer program was self-installed by the owner or the authorized user and consent for making automatic updates or upgrades was not obtained at the time of original installation, the person installing the computer program will need to seek consent to install any future updates or upgrades to such software.
However, retrieving current information and displaying it within a program or updating or refreshing information displayed in a program, such as refreshing the weather forecast in a weather app, are not considered updates or upgrades for the purposes of CASL and consent in such case would not be required.
OBLIGATION TO REMOVE COMPUTER PROGRAM
A person installing a computer program that is subject to the heightened information requirements will also need to provide assistance with uninstalling the computer programs. Moreover, if the installer did not accurately describe the function of the computer program at the time that consent was requested, the installer will have an obligation, upon request by the owner or authorized user, to remove or disable the computer program (within a one-year period from the installation of the computer program). Such de-installation must be done as soon as it is feasible and at no cost for the person who provided consent.
‘OWNER’ AND ‘AUTHORIZED USER’
According to the CRTC guidance materials, for the purposes of CASL an owner or authorized user includes anyone who has permission to use a computer system. By way of example, in the context of an employment relationship, the employer would be the owner and the employee the authorized user. In the same way, if someone leases a device, the lessor will retain ownership of the device and the lessee will be the authorized user.
CASL’S EXTRATERRITORIAL REACH
CASL applies where a computer program is installed on a computer system located in Canada even if the installation was initiated outside of Canada. In addition, CASL applies if the installation was carried out by a person located in Canada or if the person was acting under the direction of a person in Canada.
CASL contains a three-year transitional period where certain conditions are met. If a computer program was installed on a person’s computer system before January 15, 2015, consent to the installation of an update or upgrade to the program is implied until the earlier of January 15, 2018 and the date that the recipient provides notification that they no longer consent to such installations. As a result, businesses that can prove they installed a computer program prior to January 15, 2015 will have some additional time to obtain express consent to install upgrades or updates to those specific computer programs.
PENALTIES AND ENFORCEMENT
The potential penalties for non-compliance under CASL are substantial and include administrative monetary penalties of up to C$1-million for individuals and C$10-million for legal persons such as a corporation. In addition, an employer can be held liable where an employee violated CASL and the employee was acting within the scope of his or her employment, unless the employer can show that due diligence was exercised. In other words, training programs and CASL compliance policies will assist in demonstrating that the organization took reasonable measures to comply with the law.
We also note that there is vicarious liability for directors and officers resulting from a company’s failure to comply with CASL where they directed, authorized, assented to, acquiesced in, or participated in the non-compliance, subject to a due diligence defence.
Finally, CASL also creates a private right of action for persons who have been affected by a contravention of CASL's computer program installation provisions. The statutory penalties under the private right of action, namely C$200 per breach, not to exceed C$1-million per day, likely will create an area of focus for class action litigators. However, this Phase 3 of CASL will not come into effect until July 1, 2017. Nonetheless, businesses should be aware that risks of claims based on a breach of CASL exist.
ADDITIONAL GUIDANCE MATERIALS
Contrary to the flurry of guidance materials published by the CRTC prior to the coming into force of the main anti-spam provisions of CASL on July 1, 2014, the CRTC has indicated that it will be publishing additional guidance materials based on questions of interpretation and fact scenarios received during its consultation sessions with various industry groups in the coming weeks and months.