Information that is technical and valuable may be property
called a "trade secret". The proprietary protection only
lasts as long as the secret is treated as such by the owner and
remains as a secret. This article will discuss trade secret
protections in the United States and Canada.
The U.S. has federal and state trade secret laws. Almost all
states have passed their own version of the Uniform Trade
Secret Act. These statutes define what constitutes a trade
secret, prohibit certain wrongful acts and set out enforcement
mechanisms. On May 11, 2016 the federal Defend Trade
Secrets Act of 2016 came into effect.1 The new federal
law is based on the Uniform Trade Secret Act structure. It
allows trade secret owners to bring civil actions in federal court
for trade secret misappropriation where the secrets relate to a
product or service for use in interstate or foreign
commerce".2 Now, trade secrets owners have a choice
between federal and state court. Which one to pick depends on many
factors beyond the scope of this article. As an example, a federal
action may simplify evidence-gathering across state lines. The
federal law also makes additional enforcement mechanisms available,
such as court seizure orders issued without notice (ie. ex
parte) against a defendant. The order would only be available
in extraordinary circumstances, and would be limited to "the
seizure of property necessary to prevent the propagation or
dissemination of the trade secret that is the subject of the
In Canada, there is no provincial or federal statute comparable
to the US trade secret statutes. Trade secret owners can sue for
trade secret misappropriation based on common law, for example, by
starting a lawsuit based on one or more of the following: unjust
enrichment, breach of confidence, breach of fiduciary duty, breach
of contract, and wrongful interference with the contractual
relations of others. Trade secret ownership has been successfully
enforced in the Supreme Court of Canada4. A Canadian
trade secret statute would expand and improve the protections
available to trade secret owners.
Both Canada and the U.S. also have criminal laws specific to
trade secret theft. In the U.S., 18 U.S. Code § 1831
criminalizes trade secret theft that, to the knowledge of the doer,
"will benefit any foreign government, foreign instrumentality,
or foreign agent", and 18 U.S. Code § 1832 criminalizes
intentional theft of a trade secret "that is related to a
product or service used in or intended for use in interstate or
foreign commerce". In Canada, the federal Security of
Information Act (s.19) criminalizes trade secret theft sponsored
by, for the benefit of, or in association with foreign entities.
The Criminal Code (s.380) criminalizes fraud generally and may, in
some cases, render trade secret misappropriation a criminal
Given the complexity and expense of
trade secret lawsuits, and the lack of control the trade secret
owner has over criminal prosecution, trade secret owners should
take careful precautions against misappropriation and theft. The
trade secret should be identifiable and secured by measures to
protect it, including all electronic and paper copies.
Confidentiality agreements should be signed by all those who may
obtain access to a trade secret, whether employees, research
partners or business collaborators. Employers should periodically
remind staff of policies on safeguarding trade secrets, including
at exit interviews.
Pros and cons of keeping a trade
secret should be weighed against seeking intellectual property
protection, such as a patent registration. This is a careful
decision to be made on a case-by-case basis.
In summary, there are effective
mechanisms to enforce trade secret rights. However, an ounce of
prevention is worth a pound of cure so carefully control the trade
secret. Weigh the realistic likelihood of maintaining the secret
against the benefits of registering a patent.
1 See Public Law No. 114-153 or amended Chapter 90 of
title 18 of the United States Code.
2 Public Law No. 114-153, sec. 2(a).
4 Cadbury Schweppes Inc. v. FBI Foods Ltd.,
 1 SCR 142.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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