Protection of Trade Secrets

In resolving disputes, courts generally insist on full disclosure of all relevant information, in order to gain a thorough understanding of all pertinent aspects of the matter at issue. But in a competitive market, how does a company involved in court proceedings protect confidential information that is vital to the success of its business and an essential part of its identity, its corporate DNA?

The protection of trade secrets in a judicial setting can be effectively achieved, provided reasonable and appropriate measures are implemented beforehand. This can prove particularly useful in countering an access to information request, for example, or in complying with the terms of a confidentiality agreement.

The concept of a trade secret

The concept of a trade secret, which has been confirmed by the courts, stems from the law of property. The information sought to be protected must have real or potential commercial value that depends on it remaining secret. In order for information to be characterized as secret, measures must have been taken to ensure its confidentiality by limiting access to it, even by persons associated with the corporate entity to which the information is allegedly proprietary. It must be clear that the owner of the information considers it to be secret and treats it as such.

The concept of a trade secret embraces both “production secrets” and “confidential information”.

The first category requires that the essence of the innovation remains secret, continues to be useful and affords a competitive advantage over other businesses. The second category is much broader in scope. By way of illustration, a manufacturing process, recipe or formula, as well as an unpatented mechanism, constitute production secrets, while a marketing strategy, internal memo, list of clients or financial document would be considered confidential information.

Some steps to take to protect trade secrets.1

  1. Keep the production secret or confidential information in a safe and secure location.
  2. Restrict access to the production secret or confidential information to only those persons working on a specific project who need to know the secret or information for the purposes of the project.
  3. Designate a restricted and adequately monitored area for the development and implementation of the production secret.
  4. Inform all employees concerned of the confidential or secret nature of the information or the process being developed, and of the consequences of unauthorized disclosure.
  5. Label the item or document “secret”, “confidential”, “proprietary” or “access and use restricted”.
  6. Include a confidentiality clause in the employment agreement of the employees concerned, and have any third parties involved sign a confidentiality agreement.

Recognition of trade secrets by the courts

First of all, it must be borne in mind that only information protected by law, pursuant for example to solicitor-client privilege, is fully protected and cannot be compulsorily disclosed. Consequently, any other information, even if it is deemed to be confidential, must be disclosed in due course if it is relevant to a matter before a court.

However, in a litigation context it is possible to limit disclosure, by convincing the Court of the confidential nature of the information through a demonstration that protective measures such as those specified above been implemented beforehand by the owner of the thing or document considered secret.

In such circumstances the judge may decide that legal protection is warranted and rule on the appropriate method of disclosure of the trade secret so that the interests of justice are served without harming the business interests of the owner. For example, the Court may order that the evidence pertaining to the trade secret be sealed, or that it be disclosed only to the parties’ lawyers and their experts.

Finally, it should be borne in mind that the Supreme Court has recognized that in a litigation context, any information communicated to a party must be received and treated confidentially.

1 The list is not exhaustive.

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