Trade Secrets and Confidential Information

To keep a competitive advantage, businesses may maintain the secrecy of valuable information that cannot otherwise be protected by intellectual property rights. Trade secrets may include ideas, formulas, designs, methodologies, processes, financial matters, pricing policies, business plans, salaries or other compilations of information. To be considered a trade secret, the information must be used in business, not be known to the public, must confer some benefit to its holder and must be the subject of reasonable efforts to maintain its secrecy.

In Canada, trade secrets or confidential information that cannot be otherwise protected by intellectual property rights (such as patents or copyright) can be protected by a duty of confidence recognized by common law. The recipient of a trade secret or confidential information is under a duty of confidence when that person received notice, or has agreed, that the information is confidential. To evidence this notice or agreement, businesses should mark all confidential information as such and require that all recipients of confidential information enter into a non-disclosure agreement (NDA) prior to disclosure. A non-disclosure agreement (also referred to as a confidentiality agreement) is a written agreement where one party agrees to disclose confidential information on the condition that the other party limits their use and any further disclosure of the information to preserve the confidential nature of the information disclosed. Implementing non-disclosure agreements may be necessary when obtaining funding from investors or working with manufacturers, designers, distributors, consultants and independent contracts. Despite a tendency to use “standard” agreements, non-disclosure agreements should be tailored to the particular circumstances of each matter.