Trade secret is information acquired by a party which a third party agrees, knows, or reasonably to know, is confidential and which is not generally known. Any information, formula, tool, mechanism, compound or compilation of information that a company or its employees produce or acquire for the purposes of the company's business can constitute a trade secret or confidential information. Trade secrets must not be made publicly known. Information that is, or enters the public domain, cannot be protected as a trade secret.

What is a trade secret?

A trade secret is information acquired by a party which a third party agrees, knows or ought reasonably to know is confidential and which is not generally known. To be protected, the information must have been acquired in circumstances that produce an obligation of confidence. The most common example is the employer-employee relationship.

Any information, formula, pattern, device process, tool, mechanism, compound or compilation of information that a company or its employees produces or acquires for the purposes of the company's business can constitute a trade secret or, at least, confidential information. Some common examples of trade secrets are chemical formulas and secret processes. Examples of confidential information which has been protected by Canadian Courts are customer, supplier and employee lists.

Information that is in or enters the public domain cannot generally be protected as a trade secret. If a secret is discovered through independent means, the discoverer is entitled to use it.

How does the law protect trade secrets?

The law prevents an employee from using or disclosing any trade secrets contrary to the employer's interests both while employed and upon leaving the employment.

How does the law protect confidential information?

While employed, an employee cannot use or disclose confidential information acquired as a result of employment in a manner contrary to the employer's interests. After leaving the employment, an ex-employee is entitled to use confidential information that has become part of her general skills and knowledge.

Ten Important Tips for Protecting Your Company's

Trade Secrets and Confidential Information

1. Identify and document trade secrets.

2. Disclose trade secrets only to necessary persons.

3. Keep all documented trade secrets in a safe place with a strictly enforced sign-in/sign-out procedure.

4. Document all visits to your company by third parties and visits to restricted areas by employees and third parties.

5. Review all correspondence and printed matter, including speeches by employees and marketing materials, to guard against inadvertent disclosure of    

    information. Keep faxes of trade secret or confidential information to a minimum.

6. Use shredding machines to dispose of documents containing trade secrets or confidential information.

7. Educate all employees on the importance of trade secrets, and how they can be misused.

8. Include confidentiality provisions in all employer-employee agreements requiring employees and ex-employees from disclosing or using trade secrets or 

    confidential information without authorization.

9. Require that all potential licensees, franchisees or third parties sign strict agreements preventing the unauthorized use or disclosure of any trade secret

    or confidential information revealed during negotiations.

10. Reward employees for developing trade secrets.