Transcript Trade Secrets

Trade Secrets
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A trade secret has been defined as any
“information, including a formula, pattern,
compilation, program, device, method, technique,
or process that derives independent economic
value, actual or potential, from not being generally
known, and not being readily ascertainable by
proper means, by other persons who can obtain
economic value from its disclosure and use, and is
the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.”
Trade Secrets
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Art. 39 (2) of TRIPS defines a trade secret
as that which “is not, as a body or in the
precise configuration and assembly of its
components, generally known as readily
accessible to persons within the circles that
normally deal with the kind of information
in question.”
Trade Secrets
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There is no statutory definition of trade secret in
Canada. The closest to a statutory definition of
trade secrets is s.1 of the proposed Trade Secrets
Protection Act of Alberta. It defines trade secrets
as “information including but not limited to a
formula, pattern, compilation, programme,
method, technique, or process, or information
contained or embodied in a product device or
mechanism which is or may be used in trade or
business, is not generally known in that trade.”
Trade Secrets
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Trade secrets or undisclosed information may take
many forms. These include secret manufacturing
processes and formulas, customer and supplier list
of a trade or a business, food preparation recipes,
and business strategies.
Among other types of secret information or trade
secrets are know-how and show-how relating to
confidential formulas, programs, processes,
devices, etc.
Examples of Trade Secrets
There are some famous examples of
products protected by trade secrets. These
include:
 LISTERINE,
 COCA COLA,
 Recipe for Kentucky Fried Chicken (KFC)
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Origins of Trade Secrets
Trade secrets have their origins in the
common law regime of employer/employee
relations in matters pertaining to
confidential information, trust, and
apprenticeship.
 Vaver and some other scholars have traced
the origins of modern trade secrets to the
Industrial Revolution in England.
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Origins of Trade Secrets
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In the wave of new enterprises and
increased information in the possession of
employers of labour, rules were devised
during that period to deal with
“unconscionable abuses” or “unfair
exploitation” of unpublished manuscripts,
patent medicines, and new inventions by
employees of persons in the position of trust
with information on the trade.
Information is Power
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The rise of capitalism and industrialization of the
means of production gave rise to the axiom that
information is power. Such useful information
could include a manufacturing process, product
recipe, list of established clientele and supplier
base, et cetera.
Although these valuable information could be
protected in varying ways by copyrights or patents
or trademarks or design laws, a firm might choose
not to use patents or copyrights for a variety of
reasons.
Trade Secrets
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The rationale for trade secret may include the fact
that a patent would reveal the secret behind the
valuable information and hence lead to a loss of
the competitive advantage otherwise possessed by
the holder. Naturally, if the secret could be
maintained and its unauthorized disclosure
enjoined, the holder of the information would
yield superior profits. Given the inadequacies of
the patent law, especially in the 18th century, trade
secrets became a popular alternative to patents.
Trade Secrets
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Various jurisdictions differ on the precise category
of information to be protected, the degree of
commercial or economic value which the
protected information must have and the steps
which must be taken to maintain the secrecy of
such information.
Trade secrets do not have to be registered in order
to be protected.
As long as the information remains secret,
protection is afforded to the information.
Express and Implied Obligations
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Trade secrets often apply to information
communicated or acquired in circumstances
imposing obligations of confidence. Usually,
information passed during or in anticipation of a
commercial relationship. Where the exchange is
guided by a contract, the terms of the contract
would determine the extent of the obligations. In
the absence of a contract, the circumstances of the
disclosure would determine the existence or
otherwise of an obligation of confidentiality.
Limits of Trade Secrets
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There are several instances or case scenarios
where the law of trade secrets have obvious
limitations as a mechanism for the protection of
intellectual property:
1. Restraint of trade. For example, an ex-employee
is entitled to use the type of confidential
information that has become part of his or her
general skills and knowledge and that a reasonable
person would not imagine belonged exclusively to
the ex-employer.
Limits of Trade Secrets
Judges are concerned that rigid enforcement
of trade secrets may lead to new forms
servitude or serfdom on technicians and
servants.
 Information in the public domain (whether
through television, radio, published patents,
or other media) cannot generally be
protected by trade secrets.
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Limits of Trade Secrets
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The criteria for assessing confidentiality of
information include:
the extent to which that information is known by
employees, or competitors;
measures taken to safeguard the information;
Efforts or cost of developing the information;
The value of the information. See generally, LAC
Minerals, (1989) 61 D.L.R. 1.
Release from Confidentiality
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There are certain circumstances under which a
confidant may be released from the obligation of
confidence. The first circumstance is where the
confider later fully discloses the information
publicly. The second circumstance is where the
confidential information is publicly disclosed by a
3rd party. This may occur where a 3rd party reverse
engineers the product covered by confidentiality.
Thirdly, is where the confidant reveals the
information.
Limits of Trade Secrets
Trade secrets may also be limited by
compulsory licensing; or
 Governmental takings.
 A person is free to reverse engineer a trade
or manufacturing secret.
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Jurisdiction over Trade Secrets
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Usually, trade secret laws fall under the
jurisdiction of provincial Parliaments.
Summary
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The current law of trade secrets and confidential
information in Canada may be broadly stated thus,
“If B acquires information that it agrees, knows, or
reasonably to know is A’s confidential
information, B owes A a legal and/or equitable
duty not to disclose the information (as long as it
is not generally known) for a purpose other than
the one for which A allowed it to be used or
disclosed UNLESS public policy justifies B’s acts
or equitable reasons bar A from suing B.”
Industrial Espionage
Fierce competition between market actors
often lead to industrial espionage. The
epidemic of industrial espionage is rampant.
 According to one expert, “little companies
steal from big companies. Big companies
steal from small companies. Everybody
steals from everybody.”
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