Strengthening Trade Secret Protection In Canada

Staying a step ahead of competitors is key in innovative technology and life sciences industries. A minority of innovations are protected by patents, which provide a time limited monopoly to exploit an invention, in return for publicly disclosing it. Many advancements are kept as trade secrets, meaning they are not disclosed at all. Trade secrets can include either business information or technical information. The hallmarks of a trade secret are that (a) it is not generally known, (b) it has commercial value because it is secret, and (c) measures are taken to keep it secret.

This article provides a brief view of the Canadian landscape for trade secret protection, and potential for legislation to strengthen trade secret protection.

Former business partners

Business collaborations between two companies can be highly productive and profitable. They also present a risk for trade secret misappropriation. The Supreme Court of Canada recognized and enforced a trade secret in a case involving involving two companies that were former business collaborators1. Cadbury terminated a license to FBI Foods to make Clamato, the tomato/clam broth beverage. There was no express confidentiality clause in their agreement. After the business arrangement ended, the former licensee, FBI Foods, used its knowledge of the Clamato recipe to springboard ahead its own version of the tomato beverage (clam broth-free). The Clamato brand owners weren't the first to mix tomato juice and clam broth with spices, but their own version of it was a protectable trace secret. FBI foods was held liable for damages for misappropriating the trade secret.

Departing employees

When employees leave a company, there is also a risk that they may take trade secrets with them. Courts have enforced trade secrets in situation where departing employees misappropriate information and take it to a competing business. In one example, a departing employee took trade secrets for commercial scale manufacturing of Hellman's Mayonnaise to a private label manufacturer. The misappropriated information transformed the latter company's product from soupy, runny mayo to nicely whipped mayo2. Again, the misappropriator was held liable.

Trade Secrets Matter More Now

Information has always been valuable, whether customer lists, manufacturing processes or secret formulas. There are fast-growing technologies and industries in our digital age that are based on information. For example, artificial intelligence...