Trade Secret Protection And Remedies In Canada

Canada has always been a nation of innovators. From the invention of insulin, the telephone, basketball and the light bulb (Edison bought the patent from the two Canadians) to the development of the pacemaker, the  creation of the space shuttle's robotic arm and its global leadership in AI , Canadian technologies have had a global impact and the protection.Trade secrets has never been more important to companies in Canada and commercial advantage and business opportunities can stand or fall on being the first mover or established player in a competitive market. The innovation ecosystem across Canada is thriving with powerhouse federal and provincial programs that support entrepreneurs with incubators and accelerators embedded within major universities and technology hubs. Innovating companies need a robust system that prevents misuse of a company's valuable trade secrets.

In Canada, there is no federal trade secrets act or equivalent statute. Trade secret law is instead based on common law, or in the case of the province of Quebec, civil law, principles enforced in the courts through claims including torts, such as breaches of contract or confidence. Although the legislative power over trade secrets falls exclusively to the provinces, to date no province has enacted trade secret legislation.  There are also relevant dispositions in Canada's Criminal Code.

In Canada, the law relating to trade secrets has developed through common law jurisprudence, the term "trade secrets" has generally not been clearly distinguished from the broader category of confidential commercial information and similar to other countries, is generally recognized as having these four characteristics:

• The information must be secret in an absolute or relative sense (that is, known only by one or a relatively small number of persons);
• The information has been subject to reasonable measures by the business to ensure that it remains secret;
• The information must be capable of industrial or commercial application;
• The possessor must have an interest (such as an economic interest) worthy of legal protection.

Unlike for some other types of intellectual property, there is no formal registration process for protecting a trade secret in Canada. Unlike copyright or patents, there is no specific term that limits the protection afforded to a trade secret in Canada. The right to claim certain information as a trade secret is secured by taking specific measures to treat and maintain information as a secret so that it is known only by a limited group within the company. This is best accomplished by identifying what information is valuable to a company and taking sufficient measures to protect it against its disclosure. This is typically done ‎through a combination of physical, technological, and legal means such as:

• Non-disclosure or confidentiality agreements in place prior to disclosure and a clear delineation of obligations in commercial agreements;
• Disclosure only on a need-to-know basis;
• Securing information through means such as encryption, password protection and lock and key.

Maintaining all trade secrets and related material in a highly secured location will facilitate better control over the information with access granted to only a limited number of employees and only when restrictive and confidential covenants are imposed.

In the event for example of a misuse or improper disclosure of the trade secret by an employee or former employee or a misappropriation any person of a trade secret, an aggrieved trade secret owner can seek relief only in provincial Superior Courts. Provincial Superior Courts have inherent jurisdiction to hear most civil claims, while Canada's Federal Courts have only statutory jurisdiction.

The various civil causes of action that may be asserted against one or more parties in the appropriate provincial court, are breach of contract, breach of confidence, breach of fiduciary duty, unjust enrichment and wrongful interference with the contractual relations of others.

There are both legal and equitable remedies available for many of the causes of action although for breach of fiduciary duty, only equitable remedies are available. In a typical trade secret case, the owner of the trade secret will be seeking urgent relief and so the availability of extraordinary preventative remedies is important. Depending on the circumstances of the case, preliminary injunctions are available more willingly from Superior Courts and more reluctantly by the Federal Court.

On March 13, 2020, Bill C-4, the United States-Mexico-Canada ‎‎(USMCA) trade agreement implementation legislation received royal assent in Canada, providing greater protection ‎and offering additional remedies for parties that have suffered losses related to trade secrets being ‎exposed through theft, misappropriation or other fraudulent means.‎ As a result of the ratification of the USMCA, Canada is legislating stronger protection for trade secrets. As mentioned, there are also relevant dispositions in Canada's Criminal Code and from an enforcement perspective, the criminal remedy in Canada is another tool available for companies to use in the event of trade secret theft. It still remains unclear however how regularly these criminal remedies will be employed.

There is currently a push in Canada by many Canadian businesses, entrepreneurs, and innovators for the passing of a federal Canada Trade Secrets Act. With Canada's vitally important AI-sector and the fact that trade secrets are a powerful tool for protecting AI-related innovations, protection is key. Many common law jurisdictions around the world are already codifying their law in this area and having a statutory solution in Canada that explicitly recognizes and protects valuable corporate information, is widely considered an important next step to trade secret protection in Canada.