The Globe and Mail published an article recently calling for Canada to adopt trade secret legislation to provide clear, consistent, and enforceable protection for trade secrets and confidential information across the country. The article highlights a broader concern that existing trade secret protections are fragmented and uncertain. We have previously written about this often overlooked category of intellectual property, including what it is, where disputes often arise and the kind of remedies available to protect it. But now that it is back in the news, it is a good time to review the existing legal framework in Canada for protecting trade secrets and confidential information.
What is it? Why does it matter?
Trade secrets and confidential information are often a business’s most valuable asset. They might include client lists, pricing strategies, proprietary methodologies and other “under the hood” information that can give a business a competitive edge. An obvious example of a trade secret is Coca-Cola’s secret formula, which has been carefully guarded for over a century. The rapid growth of artificial intelligence, increasingly used in all aspects of business, is likely to generate more kinds of valuable confidential information and opportunities to leverage it.
What characterizes this kind of information is not just its value but also what a business must do to protect it. In order for information to be protectable as a trade secret, a business must take active steps to keep it confidential, such as limiting access, using non-disclosure agreements and clearly marking the information as secret.
The terms “confidential information” and “trade secrets” are sometimes used interchangeably but usually refer to slightly different things. The former can refer to business information that may include publicly known elements but that, on the whole, cannot be found elsewhere in any one place and is valuable primarily for that reason. The latter typically refers to more specific information such as recipes or technological innovations that are not protected by patents.
The current legal landscape
There is no specific legislation in Canada that defines rights in trade secrets, how those rights may be infringed and what remedies are available when they are infringed. In the absence of any such legislation, Canadian businesses must rely on the common law cause of action known as breach of confidence, otherwise known as misappropriation of confidential information.
To establish a breach confidence claim, a plaintiff typically must prove:
- The information at issue is confidential and commercially valuable;
- It was shared in circumstances that implied an obligation to keep it confidential; and
- It has been misused to the plaintiff’s detriment.
However, courts do not always articulate or weigh these elements in the same way and the case law across the country is not always consistent.
The inconsistencies that inevitably result from a patchwork of provincial common law have created uncertainty for Canadian businesses when it comes to safeguarding their confidential information and enforcing their rights in it. Given the increasing importance and value of confidential information in today’s economy, the laws protecting it ought to be more predictable. Legislation that codifies what a business must prove to establish that its information is confidential and that it has been misappropriated and what remedies it is entitled to is long overdue.
What businesses can do in the meantime
Until trade secrets legislation is passed, businesses must rely on the guidance to be gleaned from the existing case law when it comes to safeguarding their confidential information and trade secrets and setting themselves up as well as possible should the need to enforce rights in it arise. Some basic best practices that are unlikely to change include:
- identify all commercially valuable information in the business that is not generally known outside the business
- limit access to that information to those who need to know it and on a need-to-know basis
- use non-disclosure agreements that identify sensitive information as clearly as possible
- mark sensitive information as “confidential” where possible
- don’t expect to be able to protect “confidential information” that you have disclosed to the public to promote your business
Here at Shift Law, we have experience and expertise in trade secrets litigation and advising clients on best practices and drafting contracts to protect confidential information. Please contact us if you are looking for legal assistance in this area.
