Trade Secret (Canada)

A trade secret is business information whose value depends on staying secret. The Canadian Intellectual Property Office describes the minimum requirements as information that has commercial value, is secret, and is subject to reasonable measures to keep it secret. Common examples include:

• recipes, formulas and manufacturing processes
• unpublished source code, algorithms and AI model weights and training data
• customer lists, pricing models, margins and supplier terms
• business plans, bid strategies and unreleased product designs

Canada has no trade secrets statute and no registry. Outside Quebec, which applies civil law, protection comes from contracts, the common law and equity, enforced through claims for breach of contract, breach of confidence and breach of fiduciary duty, backed by a criminal offence. Protection can last indefinitely, but only while the information stays confidential; once it is public, it is generally gone. A trade secret also gives no protection against a competitor who develops the same information independently or works it out by reverse engineering a product it obtained lawfully.

Trade secrets are one of the main forms of business IP, alongside trademarks, copyright and patents. Our guide to protecting startup intellectual property shows how they fit together.

Contract. A non-disclosure agreement or confidentiality clause defines what is confidential, limits how it may be used and survives the end of the relationship. It is the cheapest and clearest protection, and the most reliable way to bind contractors, suppliers and prospective buyers. Lamba Law's NDA template covers mutual and one-way disclosure, standard carve-outs and an indefinite term for true trade secrets.

Breach of confidence. Even without a contract, the Supreme Court of Canada held in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, that a party is liable where information with the necessary quality of confidence was communicated in circumstances creating an obligation of confidence, and was then misused to the detriment of the party that disclosed it. The case arose from business negotiations between two mining companies, and the remedy was a constructive trust over the property the defendant had acquired using the information.

Fiduciary duty. Directors, officers and senior managers owe duties of loyalty and good faith. In Canadian Aero Service Ltd. v. O'Malley, [1974] S.C.R. 592, senior officers who resigned and took a contract the company had been pursuing were held to have breached those duties even after leaving. See directors' duties.

Criminal Code. Since July 1, 2020, section 391 of the Criminal Code has made it an offence to knowingly obtain, communicate or make available a trade secret by deceit, falsehood or other fraudulent means, or to knowingly obtain, communicate or make available one knowing it was obtained that way. The maximum penalty on indictment is 14 years' imprisonment, and independent development and reverse engineering are expressly not offences. A prosecution does not compensate the owner, so civil claims remain the main remedy.

Civil remedies include injunctions, damages, an accounting of profits and, in suitable cases, a constructive trust. Claims are generally subject to the two-year basic limitation period under the Limitations Act, 2002, which runs from discovery.

Many trade secret disputes start when someone leaves. Employees owe an implied duty of good faith and confidentiality, and they may not use or disclose the employer's confidential information after they go. They may, however, take their general skill, knowledge and experience to a competitor, and the line between the two is where litigation happens.

Ontario has narrowed the contractual tools. Since October 25, 2021, the Employment Standards Act, 2000 has prohibited non-compete agreements with employees, except for certain executives and certain sales of a business; see non-compete agreements. Confidentiality and non-solicitation clauses are not prohibited, which makes them the main contractual protection for trade secrets in employment.

Contractors and consultants do not owe an employee's implied duties, so their obligations come mainly from the contract, backed by the general action for breach of confidence. Their agreement should combine confidentiality with an IP assignment agreement, so the business owns what they create and controls what they learn.

Because secrecy has to be maintained by reasonable measures, the owner's own habits become evidence:

• limit access to those who need it, with passwords, permissions and logs
• mark confidential documents and keep a register of key trade secrets
• sign confidentiality terms before disclosure, not after
• cut access, recover devices and hold an exit interview on departure
• remind departing staff in writing of their continuing obligations

The choice is often made invention by invention. A process used inside a factory can stay secret for decades; a feature visible in the product will be studied once it is sold, so it may need a patent before launch. Public disclosure before filing can destroy patent rights, as our guide on how to patent an invention in Canada explains, so keeping a new invention confidential is also the first step toward patenting it.

A buyer or investor needs to see the information a seller most wants to protect. The first safeguard is a deal NDA, or a binding confidentiality clause in the letter of intent, signed before the data room opens; deal-specific terms such as clean-team rules for a competing buyer belong in that document. A business whose value rests on secret know-how usually adds two more protections:

• staged disclosure, with recipes, source code and customer-level data released only late in due diligence, once price and key terms are settled
• representations that the seller has taken reasonable steps to protect its confidential information and that employees and contractors signed confidentiality and IP terms

Because a trade secret has no registration certificate, the buyer's evidence that it exists and belongs to the business is the seller's contracts, access controls and records. Weak documentation can reduce the price or move the risk into an indemnity.

Lakshmi Krishnan owns a Mississauga company that makes sauces and marinades for restaurant chains, with $9 million in annual sales. Its recipes, supplier pricing and customer-specific formulations sit in a restricted folder, and every employee signs an agreement with confidentiality and non-solicitation clauses, but no non-compete.

In March 2026, production manager Alexei Morozov resigned to join a Brampton competitor. Access logs showed that two weeks earlier he had copied 140 recipe files and a customer pricing sheet to a personal drive. The competitor then quoted two of Lakshmi's largest customers prices just below hers.

Lakshmi's lawyer sent a demand letter and brought a motion for an interlocutory injunction, relying on the confidentiality clause and breach of confidence, with the access logs and folder permissions as evidence that the information was secret and protected. Alexei's general production know-how was his to use; the recipe files and price sheet were not. The parties settled before the motion was heard: the files were returned and deleted under a forensic undertaking, the competitor agreed not to use them, and it paid $85,000 toward Lakshmi's losses and costs.