Top Five Artificial Intelligence Trends Shaping Canada’s Legal Landscape in 2026

Generative artificial intelligence (“AI”) is poised to reshape the Canadian legal and regulatory landscape in 2026. As the Canadian government explores the domestic regulation of AI and businesses race to leverage AI technology, Canadians will have to navigate a changing terrain defined by both opportunity and heightened risk. This article highlights five AI trends that deserve particular attention in the year ahead, from the evolving regulatory landscape and growing scrutiny of ownership of AI outputs to questions about authorship, privacy and liability related to the use and misuse of the novel technology.

1. Navigating AI Amid Legislative Uncertainty

In June 2022, the Canadian government introduced Bill C-27, which included the Artificial Intelligence and Data Act (“AIDA”), a national framework to regulate AI systems in Canada’s private sector. AIDA received widespread criticism, including disapproval for using an exclusionary consultation process and dissatisfaction with the lack of independent oversight. Ultimately, AIDA was not enacted, leaving Canada’s regulatory AI framework in flux.

Post-AIDA, Canada has yet to develop a new regulatory framework to govern the domestic use of AI. The lack of comprehensive legislation has created ongoing uncertainty, leaving Canadian businesses unsure of their legal obligations and how to best ensure regulatory compliance when using the novel technology.

However, progress related to the regulation of AI is expected in 2026, as Prime Minister Mark Carney recently appointed Canada’s first ever Minister of Artificial Intelligence and Digital Innovation, Evan Solomon. Further, the Federal Development Agency for Southern Ontario launched an AI Strategy Task Force in the fall of 2025 and undertook a 30-day national sprint to shape a national AI strategy. Following the national sprint, the government will look to set out a renewed AI strategy to position Canada on the forefront of the AI revolution.

In 2026, Canadian businesses are encouraged to take a proactive approach to the responsible use of AI considering the absence of AI-focused legislation. Businesses should monitor sector-specific AI guidelines, voluntary codes that can inform their operations, such as ISED’s Generative AI Code of Conduct (“AI Code of Conduct”), and adopt a forward-looking approach to the use of AI, including monitoring federal developments, tracking provincial AI initiatives and remaining agile enough to adapt as the Canadian regulatory landscape becomes clearer.

2. Who Owns What? Legal Challenges in Patents and Copyright

AI continues to test the boundaries of Canadian intellectual property law in 2026. Canadian law offers no clear-cut answer as to who owns the inputs or outputs resulting from the use of AI technology. Canadians often look to international courts and foreign regulators for guidance when assessing the legality of AI because Canada’s own jurisprudence and statutory framework regulating AI remain largely underdeveloped.

In 2025, a regional German court found that OpenAI’s use of song lyrics to train its model amounted to copyright infringement because the model memorized copyrighted works and produced outputs that were nearly identical to the protected works. This decision is directly opposed to a recent decision from the U.K. High Court, which found that Stability AI’s model was not infringing Getty Images’ copyright because the AI model did not store or reproduce copyrighted works.

In Canada, patentability questions are also becoming more complex, as AI technology contributes to inventive processes in ways that blur traditional notions of human inventorship. Some clarity has also emerged in the patent context. In Thaler, Stephen L. (Re), 2025 CACP 8, the Canadian Patent Appeal Board confirmed that inventorship under Canadian law is limited to natural persons. As a result, Thaler’s applications to patent inventions created by his AI system DABUS were denied.

While Canadian copyright law still requires a human inventor, determining the extent of human contribution in AI‑assisted work is increasingly difficult. In 2024, the Canadian Intellectual Property Office registered copyright in an artwork titled, Suryast, that was authored by AI software RAGHAV and an individual. The Suryast registration was challenged in the Federal Court in 2024, with petitioners arguing that AI authorship lacks both originality and a human author. We note that the U.S. Copyright Office has denied applications for the registration of copyright where works have been generated using AI. For more information, you can read our previous article here. The outcome of the challenge to CIPO’s registration of the Suryast artwork is one to look out for in 2026, as it will likely provide greater insight into Canada’s approach to AI ownership.^[1]

3. Risk Management, Oversight and Liability

Caution is essential when using AI tools, as they are inherently fallible and cannot guarantee accuracy. Human oversight and careful verification remain critical when working with systems such as ChatGPT, Google Gemini and CoPilot.

To mitigate the risk and liability associated with using AI technology, organizations leveraging AI in 2026 should establish robust validation processes, ongoing monitoring and risk management strategies. Users of AI technology should also conduct thorough due diligence and remain alert to potential systemic or institutional biases embedded in AI outputs. Even in the absence of federal legislation in Canada, users remain liable for outputs created by AI technology under existing laws.

4. Privacy and Data Sovereignty

The development of AI technology depends heavily on data, placing privacy and data sovereignty at the centre of legal risk. In Canada, the collection, use and disclosure of personal information in commercial activities are regulated by privacy laws such as the Personal Information Protection and Electronic Documents Act (“PIPEDA”). PIPEDA requires organizations to obtain informed consent before collecting or processing personal data, which includes any information entered into or generated by AI systems. However, Canada’s privacy landscape is evolving, with proposed federal reform and stringent provincial regimes – particularly in the province of Quebec – raising the bar for consent, transparency and the requirement to disclose the use of automated decision-making.

Many AI platforms retain the right to store and utilize data inputs to improve their models. This raises uncertainty about how the information is stored, where it may be shared and who can access it. Such ambiguity can put businesses at risk of losing control over sensitive information, including intellectual property, trade secrets and other confidential data. Organizations looking to adopt third-party AI tools in 2026 without compromising privacy protections are encouraged to partner with vendors that maintain high standards of security and certified compliance. It is equally important to confirm that a third-party’s data processing procedures conform to both internal business policies and applicable Canadian laws.

In the absence of comprehensive legislation, a growing body of Canadian non-binding standards, guidelines, frameworks, and principles is playing an increasingly important role in shaping responsible AI development and use. Notable examples include the AI Code of Conduct and the nine AI principles published by the Office of the Privacy Commissioner of Canada (“OPC”). For more detail on the OPC’s AI guidelines, please see our earlier article here.

And as recent as January 21, 2026, the Ontario Information and Privacy Commissioner and the Ontario Human Rights Commission released their Principles for the Responsible Use of Artificial Intelligence.

While these instruments do not carry the force of law, they are influential in how regulators and courts interpret acceptable conduct. They can also help businesses to build robust governance structures in anticipation of formal AI regulation.

5. Cross-Border Data Transfer

AI systems often rely on global data ecosystems, making cross-border data transfer a critical issue for Canadian businesses in 2026. As AI companies expand operations into other countries, they may encounter regulatory environments that differ from Canadian standards. Countries with less stringent data, privacy or human rights regulations, may put Canadians’ personal information and security at risk. Any data transfer to jurisdictions without comparable privacy protection to Canada require careful assessment and, in some cases, enhanced contractual or technical safeguards. This is particularly relevant for organizations using foreign-based AI platforms. As global regulation of AI advances, cross-border compliance will become increasingly fragmented and will demand sophisticated legal coordination.

Take-Away

As Canada moves through 2026, the legal landscape surrounding both the use and development of AI remains unsettled and increasingly consequential for businesses across all sectors. The rapid evolution of AI presents both opportunities and legal complexities for Canadian business. The trends emerging in 2026, including legislative uncertainty, intellectual property challenges, liability, stringent privacy regimes and cross-border data considerations, underscore the need for proactive governance and careful navigation. The absence of formal legislation governing the use of AI has heightened the need for businesses to undertake strategic planning and implement risk-based governance frameworks to harness the benefits of AI while protecting against legal risks. Businesses that invest early in robust oversight of AI and thoughtful risk mitigation will be better positioned to navigate the shifting Canadian landscape as clearer regulatory direction emerges.

For more information about leveraging AI technology in Canada, please contact Roland Hung and Laura Crimi of Torkin Manes’ Technology and Privacy & Data Management Groups.

The authors would like to acknowledge Torkin Manes’ Articling Student Kayla Oliveira for her invaluable contribution in drafting this bulletin.