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SCC Defines Trade Secret and Confidential Commercial Information

The Supreme Court of Canada recently defined the legal meaning of the terms “trade secret” and “confidential commercial information” for the purposes of access to information legislation and at common law.

Access to information laws typically provide that third party trade secret and confidential information may be protected from disclosure. In Merck Frosst Canada Ltd. v. Canada (Health), Health Canada received requests from an applicant under the Federal Access to Information Act to disclose trade secret and confidential information relating to new drug submissions made to it by Merck. A series of disputes arose between Health Canada and Merck about what information could be disclosed and what was exempted from disclosure under the Act. The matter proceeded through the Federal Court and Court of Appeal. The Federal Court held that the disclosure of some of the information without notice to Merck was improper. In addition, the Court ruled that some of the records were exempted from disclosure because they contained trade secrets, confidential information or information that if disclosed could reasonably be expected to result in material financial loss or gain to Merck or prejudice its competitive position. The Court of Appeal allowed the appeals and ruled that all of the information could be disclosed. The majority of the Supreme Court of Canada (in a 4-3 decision) dismissed the appeal.

The SCC defined “trade secret” as information relating to a plan or process, tool, mechanism or compound that is: (a) secret in an absolute or relative sense (i.e. known by a relatively small number of persons); (b) is treated as a secret; (c) capable of industrial or commercial application; and (d) worthy of legal protection due to the economic interest of the possessor. “Confidential Commercial Information” was defined as information related to matters of finance, commerce, science or technical matters, and having value based on the use that could be made of it in the market place.

Organizations wishing to rely on the protections afforded to trade secrets and confidential commercial information under access to information legislation will welcome the Court’s clarification of these terms. In the event that records containing this type of third party business information are responsive to an access request made to a public body, this decision may be of assistance in marshalling arguments as to why the information at issue should be protected from public disclosure (subject to any statutory definitions contained in the relevant legislation). In addition, employers may wish to review definitions of trade secrets and confidential commercial information in their employment and other agreements to determine if the use of these terms in restrictive covenants and non-disclosure obligations are consistent with the Court’s definitions.

Merck Frosst Canada Ltd. v. Canada (Health), 2012 SCC 3