In Canada, trade secrets include any business information that is secret, has commercial value for its owner, and measures are taken to protect it.
In this article, I will break down the meaning of Trade Secret in Canada so you know all there is to know about it!
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Let me explain to you trade secret in Canada and why it matters!
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What Is Trade Secret
In Canada, the notion of trade secret includes any business information that is kept secret and has commercial value for the business.
In other words, a trade secret is commercially valuable business information that a company uses, or can use, to generate revenues and profits.
The most famous example of a trade secret is Coca-Cola’s secret recipe to make their famous pop drink.
Coca-Cola goes to great lengths to protect its secret recipe to make its iconic Coca-Cola soft drink and this trade secret is potentially worth billions of dollars to the company.
In essence, trade secret can be anything of value, such as a software product, a new design process, a secret recipe, a chemical formula, or any other information that can be used for profit.
You can consider “trade secret” to be a form of intellectual property but without having specific statutory protection and not subject to any formal registration requirements.
Keep reading as I will break down trade secrets in Canadian law in further detail.
Trade Secret In Canadian Law
In Canada, the law does not expressly define a “trade secret”.
The notion of trade secret falls under the exclusive legislative power of the Canadian provinces.
As such, the notion of trade secret is routed in Canadian common law and Quebec civil law in Quebec.
Trade secrets are protected using contract law, breach of contract, tort, duty of confidence, or fiduciary duty that the recipient of the information owes the disclosing party.
Over the course of the years, the notion of trade secret has been developed to include any information that has commercial value for the business, the information is secret, and the company exercises measures to keep the information secret.
The first requirement is that the information must have commercial value.
A business may have a lot of data and information but that may not have any particular commercial value.
The second requirement is that the information must be secret.
In other words, the trade secret must not be available to others, such as competitors, the public, or other parties outside of the organization.
And the third element is that the company takes specific measures to protect its trade secret and ensure that it is kept secret.
Court Evaluation of Trade Secrets
The notion of trade secret is regularly brought up before the Courts in Canada in cases where a party may have misused or misappropriated the trade secret of another.
Since there is no federal trade secrets act or statute, the courts will need to look at the specific circumstances of the case to assess whether or not the company information was a trade secret and if a company is entitled to compensation should there be an infringement of some kind.
Some of the factors that the court will look at to assess whether business information qualifies as trade secret are the following:
- How does the company protect the information
- What measures are taken to keep the information secret
- How much money does the company invest in keeping the information secret
- How much money did the company spend to acquire the information
- Did the company develop its own proprietary information
- To what extent does the business consider the information to be confidential
- Did the company inform the recipient of the information that the information is confidential
Once business information is qualified as a trade secret, the courts provide legal protection against possible infringements and misuse.
There are no statutes of limitation or expiry relating to how long trade secrets will be legally protected.
Trade secrets will remain protected for the entire time that the company protects the information and maintains it a secret.
How To Protect Trade Secrets
Individuals and businesses may acquire or develop trade secrets based on which they intend to generate a return.
It’s important that you protect your trade secrets to avoid having your competitors achieve a competitive advantage over you and, most importantly, to ensure the long-term profitability of your business.
At the most basic level, you must make sure that you enter into appropriate confidentiality agreements with any individual or business entity that will access or be exposed to your trade secrets.
Then, you must make sure that your employees all have confidentiality clauses in their employment agreement ensuring that they maintain all your trade secrets confidential and prohibit them from using them in any context outside of their employment.
Companies should also develop internal policies and practices intended to specifically protect their trade secrets.
For example, from a network perspective, companies can consider implementing Chinese Walls to separate individuals or groups that have special access to sensitive information.
Companies can also use encryption techniques, use highly restricted accesses, and designate specifically authorized individuals to handle a certain types of information within the organization.
Trade Secret Infringement
In Canada, the law applicable to trade secrets is developed through common law and civil law principles in Quebec.
To start with, trade secret infringement requires that the plaintiff demonstrate that the information given to the recipient was confidential, the disclosure was done in confidence, and that the recipient misused the trade secret.
In the event a party infringes upon another’s trade secret, there are different types of recourse that can be taken to seek an appropriate remedy.
The following causes of action may be asserted against a party misusing or infringing on another party’s trade secrets:
- Breach of contract
- Breach of fiduciary duty
- Breach of confidence
- Unjust enrichment
- Wrongful interference with contractual relations
- Injunctive relief
Depending on the circumstances, there may also be criminal consequences as there are some dispositions in the Canadian Criminal Code on this matter.
In addition, under the federal Security of Information Act, if the trade secret is shared with a foreign economic entity resulting in damage to the Canadian economy, security, or international relations, it may be considered economic espionage.
So there you have it folks!
What does trade secret mean in Canada?
In a nutshell, in Canada trade secret is a broad term that can refer to many different types of business information such as production methods, software solutions, design, processes, customer lists, business plans, and others.
The notion of trade secret is not statutorily defined, as a result, we use the Canadian common law to define it in Canadian provinces (and civil law in Quebec).
This is quite different than the United States where they have federal and state statutes governing trade secrets.
For business information to be considered a trade secret, it must have economic value to its owner, must be secret, and the company must take measures to keep the information secret.
Companies should carefully consider the trade secret strategy to ensure that they adequately protect their valuable trade secrets and do what’s necessary to ensure that they are afforded legal protection.
If you are dealing with a matter involving trade secrets or trade secret infringement, be sure to work with a qualified attorney to guide you through the process.