The understanding and management of trade secrets have become increasingly important in recent years due to the competitiveness of modern businesses in the knowledge economy. However, the business value of trade secrets remains underestimated compared to “traditional” forms of intellectual property, such as patents, trademarks and copyright — be it in the technology, manufacturing or services sector. Moreover, it has always been, and still is, difficult to agree on a single definition of trade secrets.

Gowling WLG professionals have been working with clients to practically define what trade secrets mean for their businesses. We look forward to sharing this knowledge through a series of short articles which will be followed by a conference held this fall by our Montréal office.

Through this material, we hope to provide you with a better understanding of what may be protected under trade secret law, the strategic advantages of trade secrets over other forms of intellectual property and how to keep benefiting from the protection afforded to trade secrets to gain a competitive edge.

What is a trade secret?

A trade secret is a type of intellectual property protected by Canadian courts in case of unauthorized disclosure, misappropriation or misuse.

Unlike other better known forms of intellectual property, no comprehensive definition of a trade secret has been enunciated in a particular law or by Canadian courts. However, all trade secrets share the following core characteristics:

  • The information that defines the trade secret is not generally known to the public.
  • The trade secret has economic value or confers a competitive advantage to its owner.
  • The trade secret is subject to reasonable efforts to maintain its secrecy.

The type of information that can be protected under trade secret law is boundless. It may consist of a formula, a manufacturing process, industrial know-how, an algorithm, a design, customer lists, financial information, etc.

Of course, once a trade secret is disclosed to the public, it is not secret anymore and becomes generally available to all. While the disclosing party, in some instances, might be liable to the owner of the trade secret for its unlawful disclosure, the related information is nevertheless made available to the public: “Once the toothpaste is out of the tube, it's hard to get it back in”. Furthermore, trade secrets which have been discovered and disclosed independently or through lawful means are simply freely available without limitations.

Practical tip

Trade secrets can be extremely valuable assets of your business, but their value is fragile and can vanish if not adequately protected. Properly recording evidence of your trade secrets and adequately securing access to the related information are the very first steps to minimize the risks of loss – and maximize the value for your company.

In the upcoming articles, we will discuss some strategic implications of trade secrets and provide additional tips on how to identify your trade secrets.