Trade Secrets 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 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 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 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) 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. Origins of Trade Secrets 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of labour, rules were devised during that period to deal with “unconscionable abuses” or “unfair exploitation” of unpublished manuscripts, patent medicines, and new inventions by employees of persons in the position of trust with information on the trade.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 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 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 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 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 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. Limits of Trade Secrets 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 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. Jurisdiction over Trade Secrets Usually, trade secret laws fall under the jurisdiction of provincial Parliaments. Summary 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.”