What Qualifies As Trade Secrets (All You Need To Know)

A trade secret is any information that has commercial value, is kept secret, and where the owner takes measures to keep it a secret.

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Let me explain to you what qualifies as trade secrets in Canada!

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What Qualifies As Trade Secrets

In business today, the notion of trade secrets has become increasingly important.

In fact, the value of many companies is now composed of intangible assets such as intellectual property, patents, and trade secrets rather than physical assets.

Companies spend significant sums of money to develop their trade secrets to achieve a competitive edge on the market and such information must be fiercely protected.

However, what qualifies as a trade secret?

How do you know what information is considered a trade secret so you can implement the right policies, procedures, and practices to protect that information?

In Canada, a trade secret is qualified as any business information that has a commercial value derived from its secrecy.

For information to be considered a trade secret, you will need to satisfy three elements: the information must have commercial value, the information is kept secret, and the company takes reasonable measures to keep the information secret.

Let’s break this down to better understand these elements.

Information With Commercial Value

The first element required for information to be considered as a “trade secret” is that the information must have commercial value.

For example, the most cited trade secret having commercial value is Coca-Cola’s pop soda recipe.

Coca-Cola’s soft drink recipe has astronomical value for the company and keeping the recipe secret is the most important objective of the company.

Coca-Cola has been successful in keeping its recipe secret for over 100 years and will take strict measures to ensure it remains a secret for many years to come.

Other examples of information that may have commercial value are software source codes, customer lists, secret formulas, product designs, and so on.

Information Must Be Secret

The second element you need to be in the presence of a trade secret is that the information must be kept “secret”.

In other words, the information is not readily accessible to the public, the company does not share the information with anyone unless there is a compelling reason, and people who access the information are made aware that this is confidential or sensitive information.

As the name implies, for the information to be considered a trade secret, the company must demonstrate that it is the only entity having access to the information and restricts access to others.

Reasonable Protection Measures

A third element you need to be in the presence of a trade secret is that the company or owner takes reasonable measures to ensure the information is protected.

The most common way companies protect their trade secrets is that they enter into non-disclosure agreements and confidentiality agreements with those who access the information.

Typically, companies will have confidentiality agreements with their employees and key personnel.

With regard to third parties, the company will execute confidentiality and non-disclosure agreements with its suppliers, vendors, contractors, and third parties to ensure that they clearly define what information is shared and how it must be protected.

Recommended article: How to protect your trade secrets

Factual Elements Considered By Courts

In Canada, there are no statutes clearly defining trade secrets.

As a result, trade secret law is based on common law across Canada and civil law in Quebec.

Determining whether a piece of information is considered a trade secret or not requires that the court factually assess the information, how it was protected by the company, and what measures were taken to keep the information secret.

Typically, the courts will ask the following questions:

• What is the information the company considered a trade secret?
• Does that information have value to the company when kept secret?
• Did the company take any reasonable measures to protect the information?
• How much money does the company spend protecting the information?
• How easily can employees access the information?
• How easily is the information shared with third parties?
• Was the information shared under confidentiality notices?
• Did the company have internal policies and procedures to protect the information?

As you can see, the plaintiff in a trade secret lawsuit has the burden to prove that the information accessed, shared, or obtained by the defendant was in fact “trade secret”.

Recommended article: Trade secret vs patent

Takeaways 

So there you have it folks!

What constitutes a trade secret?

In a nutshell, a trade secret can be any information that is commercially valuable to a company and that is kept secret.

In other words, the notion of trade secrets is very broad as it encompasses “any information” that has “commercial value” and is kept “secret”.

In Canada, we do not have any trade secret acts or similar statutes where the law defines the exact meaning of a trade secret. 

As such, the meaning of trade secret comes from the common law and the civil law for Quebec.

In general, any information that has commercial value, is kept secret, and that the company exercises an effort to keep secret can be considered a trade secret.

Now that you know what information can constitute trade secrets in Canada, good luck with your research!

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