International Market Selection Strategies for Software Companies –

Legal Considerations

Richard Austin

Toronto Computer Lawyers’ Group

October 8, 2009

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ISSUES

I. Canadian Legal Issues

II. Foreign Law Issues

III. Commercial Issues

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I. CANADIAN LEGAL ISSUES

A. Corruption

Corruption of Foreign Public Officials Act (1998, c.34)

 

Criminal Code ( R.S., 1985, c. C-46 )• ss. 119 - 124• s. 426

 

(*) U.S. Foreign Corrupt Practices Act (for Canadian subsidiaries of U.S. Corporations)

 

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I.A Corruption cont’d

Transparency International Corruption Index

http://www.transparency.org/policy_research/surveys_indices/cpi

TI 2008 Corruptions Perceptions Index (CPI)

Rank Country

  1 Denmark

9 Canada

18 United States

82 China

85 India

147 Russia

176 Afghanistan

180 Somalia

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I.B Export

 

Export and Import Permits Act ( R.S., 1985, c. E-19 )

• Area Control List

• Export Control Listo A Guide to Canada’s Export Controls - General Software Noteo Software under Group 1 (Dual Use) Category 5 Part 2 Information

Security o Item 5400 – United States Origin Goods and Technology

 

United Nations Act ( R.S., 1985, c. U-2 )

 

Special Economic Measures Act ( 1992, c. 17 )

 

(*) Foreign Extraterritorial Measures Act ( R.S., 1985, c. F-29)

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II. FOREIGN LAW ISSUES

A. Establishing a Foreign Presence

Type of business organization, e.g.:

• Branch or Representative Office

• Joint Venture (Equity JVs and Co-operative JVs)

• Partnerships

• Wholly-owned entity, e.g. Wholly Foreign-Owned Enterprise (WFOE) (China)

Capitalization Requirements

• Amount

• Timing

• Form of contribution

Permitted Activities6

II.A Establishing a Foreign Presence cont’d

Documentation and approvals:o For the establishment of the foreign presenceo For carrying on a businesso For the specific business to be carried on

Business Scopeo Activities outside the scope of the approved business scope

Location of Registered Office / Places of Business

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II.B Import Restrictions

Depends on categorization under country specific laws, e.g.• Prohibited• Restricted• Freely-tradable

Approval and registration requirements

Connection to ability to remit foreign exchange settlements?

 

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II.C Financial/Tax

Foreign Exchange Restrictions

Taxes• Compare foreign tax rate on business earnings

• Understand available incentives

• Treaty network with Canadao Most marketing arrangements involve payment of royalties

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II.D Employment Laws/Issues

Impact of local labour laws and practices:

• Salaries including minimum wage laws, salary inflation and COLA• Benefits (Unemployment insurance, health insurance and welfare

benefits, pensions)• Probationary periods• Turnover/Attrition/Retention• Termination of Employment• Unions and work councils• Employment of Canadians (*)

 

(*) For expatriate employees, consider: (i) willingness/ability to go; (ii) immigration requirements; (iii) personal taxes; and (iv) costs.

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II.E Other

Marking/certification requirements

Foreign privacy laws

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III. COMMERCIAL ISSUES

A. Intellectual Property Protection

Extent of protection under local IP laws• Agreement on Trade Related Aspects of Intellectual Property Rights

(TRIPS)• Understand and use foreign IP regime (Chint v. Schneider Electric)

Implementation and Enforcement:• Ease and location of infringement• Effectiveness of Administrative, civil and criminal regimes• Priorities, ability and knowledge of police and judiciary• Public policies

Implement Intellectual Property Protection Regime

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III.B Resolution of Disputes

How to obtain an effective remedy?

• Arbitration vs. Court

• Governing Law/Attornment

• Enforcement of Judgments

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Questions?

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