The Limited Protection of Trade Secrets Under Quebec Law
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THELIMITEDPROTECTIONOFTRADESECRETS
UNDERQUEBECLAW
Marie-ÈveCôté*
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
55St-Jacques,Montreal(Quebec)CanadaH2Y3X2
Tel.(514)987-6242-Fax(514)845-7874
E-mail:marion@robic.com–WebSite:www.robic.ca
OnSeptember7,1999,theCourtofAppealofQuebecrenderedadecision,which
constitutesaconsiderableanalysisregardingthelegalprotectionofferedtotrade
secretsinCanadaandmoreparticularlyunderQuebec’scivillawsystem.InGhaly
EliaGideonandGideochemInc.v.Tri-TexCo.Inc.
[1999]R.J.Q.2324(C.A.)
(JusticeJosephR.Nuss,writingforapanelof3judges),theCourt,onanappeal
fromajudgementoftheSuperiorCourt,wasspecificallyaskedtoissueonwhether
ornotsecretsformulaearetobeprotectedbytheCopyrightActandonthepossibility
forapersontoseizeconfidentialinformationbeforejudgementallegingownershipof
same.
FactsbeforetheCourt.Intheabove-mentioneddecision,acompanycalledTri-Tex
Co.Inc.(Tri-Tex)manufacturesdyesandotherchemicalproducts.Inrelationwithits
business,Tri-Texdevelopedsomesecretformulaefortheproductionofdyesand
otherchemicalproducts,whichsecretformulaearenotbeingprotectedbyapatent.
InMay1998,Tri-TexallegedthatacompanynamedGideochemInc.(Gideochem),
whichoperatesasimilarbusiness,hadobtained,illegally,someofTri-Tex’s
confidentialinformationanditssecretformulae.AccordingtoTri-Tex,Gideochem
madeanofferofemploymenttoaTri-Texemployeewhohadaccesstothesecret
formulaedevelopedbyTri-Tex.Tri-Texalsopretendedthattwolongtimeemployees
soldanumberofTri-TexsecretformulaetoGideonandGideochemfor$300per
formula.Moreover,Tri-TexallegedthatoneofthesaidemployeesgaveGideonand
GideochemalistofTri-Tex’ssuppliers.
PositionofTri-Tex.Tri-Texcausedtobeissuedawritofseizurebeforejudgement
underart.734(1)CivilCodeofProcedure(C.C.P.)whichauthorisesseizurewithout
judicialapprovalinthecasewhere”themoveablepropertywhichithasarightto
claimallegingarightofownershiponthesecretformulaeaswellasontheproducts
producedtherefrom”(underlinesbyauthor).Tri-Texargued:(i)thatthewritten
versionsofthechemicalformulaecreatedanddevelopedinitslaboratoriesconstitute
literaryworkswithinthemeaningoftheCopyrightAct,and(ii)tohavearightof
©LEGERROBICRICHARD,1999-2002.
*LawyerwiththelawfirmLEGERROBICRICHARD,g.p.andwiththepatentand
trademarkagencyfirmROBIC,g.p.
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ownershipintheconfidentialinformationamongother,itstradesecretsandits
chemicalformulae.
PositionofGideochem.GideochemfiledamotiontoquashTri-Tex’sseizure
beforejudgementalleginginsufficiencyandfalsityoftheaffidavitonthestrengthof
whichthewritofseizurewasissued.GideochemadmittedcontactingsomeofTri-
Tex’ssuppliersbutthattheirnameswereobtainedfrommagazinesorthroughother
means.Furthermore,GideochemconfirmedmakinganofferofemploymenttoaTri-
Texemployeebutthatitiscommontodosointheindustry.Finally,Gideochem
admittedbringingintwoTri-Texemployeesinordertoobtainsomeformulae,but
onlytoexposetheinferiorqualityoftheTri-Texproducts.Ontheotherhand,
GideochemarguedthatTri-Texdidnothavetherighttoseizeallofthemoveable
effectsbecauseitcontendsconfidentialinformationconcerningGideochem’s
business,financialstatus,clients,etc.
TheSuperiorCourtquashedinpartTri-Tex’sseizurebeforejudgementonthe
groundsofinsufficiencyandorderedthetakingofaninventoryofcertainitemsseized
byTri-Tex.Also,SuperiorCourtJudgeDalphondconcludedthattheCopyrightAct
doesnotapplyinsuchacase.
TheCourtofAppealwasseizedoftwoquestions:(i)theapplicationoftheCopyright
Act,and(ii)theseizurebeforejudgementofconfidentialinformation.
CopyrightAct.WhentheCourtofappealwasaskedtoissuearulingonwhetheror
notTri-Tex’schemicalformulaeweresubjecttotheCopyrightAct,JusticeNuss
confirmedthedecisionrenderedbySuperiorCourtJudgeDalphondandrestateda
fundamentalruleofCopyrightLawsayingthattherecanbenocopyrightinideasor
ininformationbutonlyintheexpressionofthemandthatideasarepublicproperty.
TheCourtdecidedthatthechemicalformulaewereideasandassucharenot
subjecttocopyright.JusticeNussspecifiedthateveniftheformulaewerewrittenor
printedonpaperorotherwiserecordedoncomputersoftware,itdoesnotmeanthat
theyare”literaryworks”withinthemeaningoftheCopyrightAct.
TheCourtmentionedthattheTri-Texformulaemightconstituteatradesecretand
referredtothedefinitionoftradesecretsproposedbyMr.JusticeBironinthecase
PositionInc.v.Desrochesetal.[1988]R.J.Q.1636:
Tradesecretsareusuallyformulas,manufacturingprocessesuniquetoits
ownerandwhichhavebeenrevealedconfidentiallytoanemployee.This
isnotexperienceacquiredbyanemployeebut,moreexactly,knowledge
or”savoir-faire”belongingtotheemployerandrevealedbyhimforthe
solepurposeofpermittingtheemployeetoproducewhatthetradesecret
enableshimtodo.Includedinthiscategoryarechemicalformulas,
recipes,manufacturingtechnologies(…)[Ourtranslation]
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TheCourtwrotethefollowing:”Tradesecretsmayincertaincasesbeprotected
contractually(e.g.noncompetitioncovenants),bytheapplicationofcertainlegal
concepts(e.g.employeeloyalty,unfairtradepractices,theobligationtoactingood
faith)orbyhavingrecoursetothePatentAct.”However,JusticeNussmadesureto
specifythattheycannot,simplyonthegroundsofbeingtradesecrets,beafforded
protectionundertheCopyrightAct.Onlytheexpressionoftheseformulaecouldbe
protected.Followingtheinstructionstoproducethechemicalcompoundswouldnot
beinfringingTri-Tex’scopyright,itwouldonlybeusingtheideacontainedinTri-Tex’s
“literaryworks”(chemicalformulae).
Seizurebeforejudgement.TheCourtwasthenaskedtodecidewhetherornot
confidentialinformationconstitutes”movableproperty”withinthemeaningof734(1)
C.C.PinordertoseizeanumberofitemsatthecommercialpremisesatGideochem
beforejudgement.TheCourtstatedthat”therighttoseizebeforejudgementisa
provisionalremedyofanexceptionalnatureandthatawritofseizuremaytherefore
beissuedonlyincircumstanceswheretherulesgoverningthisprocedurehavebeen
strictlyobserved”.
TheCourtcitedR.v.Stewart[1988]1R.C.S.969,inwhichtheSupremeCourtof
Canadaruledthatconfidentialinformationdoesnotconstitute”propertywithinthe
meaningofs.283or338oftheCriminalCode”afterthecommentofSupremeCourt
JudgeLameronwhetherornotconfidentialinformationcanbeconsideredas
property:
Indeed,[confidentialinformation]possessesmanyofthecharacteristicsof
otherformsofproperty:forexample,atradesecret,whichisaparticular
kindofconfidentialinformation,canbesold,licensedorbequeathed,it
canbethesubjectofatrustorpassedtoatrusteeinbankruptcy.Inthe
commercialfield,therearereasonstograntsomeformofprotectiontothe
possessorofconfidentialinformation:itistheproductoflabour,skilland
expenditure,anditsunauthorisedusewouldundermineproductiveefforts
whichoughttobeencouraged.Astheterm”property”issimplya
referencetotheclusterofrightsassignedtotheownerthisprotection
couldbegivenintheformofproprietaryrights.Thecasesdemonstrate
thatEnglishandCanadiancivillawprotectconfidentialinformation.
However,thelegalbasisforgoingsohasnotbeenclearlyestablishedby
theCourts.
[…]
Itappearsthattheprotectionaffordedtoconfidentialinformationinmost
civilcasesarisesmorefromanobligationofgoodfaithorafiduciary
relationshipthanfromaproprietaryinterest.NoCanadianCourthasso
farconclusivelydecidedthatconfidentialinformationisproperty,withall
thecivilconsequencesthatsuchafindingwouldentail.[pp.974-976]
After,JusticeNussreviewedthejurisprudenceandthedoctrineinQuebecwherea
trendofopinionsuggestthattradesecretsandknow-howaretobetreatedas
property.TheCourtreferredtoarticle1612CivilCodeofQuebecwhereitspeaksof
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the”holderofatradesecret”.JusticeNuss,afterdiscussingthepossibilitytotreat
confidentialinformationasmovableproperty,cametotheconclusionthattheCivil
Codedoesdistinguishbetween”property”and”information”or”rightofintellectual
property»andconsequently,thesefactsimplythatinformationcannotbeassimilated
withproperty,andrejectedthepropertyrighttheory.
Decision.Finally,JusticeNussconcludedthat:(i)theCopyrightActdoesnot
providealegalbasisfortheseizureoftheitemssoughttobeseized,and(ii)Tri-Tex
didnotsucceedindemonstratingthatconfidentialinformationconstitutes”moveable
property”withinthemeaningofarticle734C.C.P.anddismissedtheappeal.
Conclusion.Thisjudgementconfirmsthattheprotectionofacorporation’strade
secretsandconfidentialinformationislimited.Eveniftradesecretsareinwritten
form,theydonotgainprotectionundertheCopyrightActbecausetheyarenot
considered”literaryworks”.ThisconclusionshouldclosethedebateintheProvince
ofQuebeconpropertyintradesecrets.Tradesecretsarenotmoveableproperty
andshouldnotbeviewedassuch.Suchadecisionclearlystatestheapplicationof
thelawandtheinterpretationtoadoptinsuchcases.
Forthesereasons,itisessentialthatacorporationthathassuchconfidential
informationandtradesecretsbecarefulinprotectingthemwithspecificanddetailed
contractualprovisionswiththeiremployeesandotherrelevantpartiesandby
managementsystemsthatwouldensurefullandefficientprotection.Specialcare
shouldbetakeninplaningalicensingprogramonpuretradesecrets,whetheras
licenseelookingforcertainguaranteesofconfidentialityandcontroloraslicensor
calledupontogivethem.
Publishedat(2001),3-2WorldLicensingLawReports23-24underthetitleThe
LimitedProtectionofTradeSecretsunderQuebecLaw