Trade Secrets and Confidential Information: How Ontario Businesses Protect What They Know

Not all business value lives in a registered patent or trademark. Your customer list, your pricing model, your proprietary process, your supplier relationships — this information can be the most valuable asset your business has, and it may be walking out the door with your next departing employee unless you have the right protections in place.

Trade secrets and confidential information are forms of intellectual property that rely not on registration but on secrecy and contractual protection. This guide explains how Canadian law approaches these protections and what practical steps Ontario businesses can take.

What Is a Trade Secret?

A trade secret is information that:

1. Has commercial value because it is not generally known or readily ascertainable.
2. Is subject to reasonable steps by the holder to keep it secret.

Canadian law does not have a single comprehensive trade secrets statute the way some other jurisdictions do. Instead, trade secret protection in Ontario arises from a combination of:

• Breach of confidence (an equitable doctrine enforceable in Ontario courts).
• Contract law — specifically, non-disclosure agreements (NDAs), employment agreements, and services contracts.
• In some contexts, criminal law provisions relating to fraud and breach of trust.

Classic trade secrets include:

• Secret formulas or recipes (the famous example is Coca-Cola's formula).
• Proprietary manufacturing processes.
• Customer and pricing data.
• Software algorithms.
• Business strategies not yet made public.

The Breach of Confidence Doctrine

In Ontario (and across Canada), courts have long recognized a cause of action for breach of confidence. To succeed, you must show:

1. The information was confidential in character — meaning it had the quality of confidence.
2. The information was communicated in circumstances importing an obligation of confidence.
3. The recipient used or disclosed the information to the detriment of the discloser.

This doctrine applies even without a written contract — if you share business-sensitive information with someone in a context where a reasonable person would understand it was confidential (a meeting with a potential investor, a discussion with a supplier), the law may impose a duty not to disclose it. However, proving and enforcing this in court is far more difficult without a written agreement.

Confidentiality Agreements (NDAs)

A non-disclosure agreement (NDA) — also called a confidentiality agreement — is a written contract that sets out:

• What information is considered confidential.
• What the receiving party may and may not do with it.
• How long the obligation of confidence lasts.
• What happens on breach (e.g., injunctive relief, damages).

NDAs are useful in several contexts:

With Employees

An employment contract should include confidentiality provisions that:

• Identify what categories of information are confidential.
• Obligate the employee to keep that information secret both during and after employment.
• Require the return or destruction of confidential materials upon departure.

With Independent Contractors

The same principles apply. A services agreement with a contractor should include a confidentiality clause — and, as discussed elsewhere in this series, an IP assignment clause.

With Business Partners, Investors, and Vendors

Before sharing sensitive business information with a potential partner, investor, or supplier, have them sign an NDA. This is standard practice and protects your information before any business relationship begins.

What Makes Information "Confidential" Enough to Protect?

Courts look at whether you have treated the information as confidential in practice. Steps that support a finding that information was a protectable trade secret include:

• Limiting access to employees with a need to know.
• Using password protection, locked storage, or access controls.
• Labelling documents "confidential."
• Requiring employees and contractors to sign NDAs.
• Having policies about not discussing sensitive information outside the business.

Information that is publicly available, easily reverse-engineered, or shared without restriction does not qualify as a trade secret. The secrecy must be genuine.

When an Employee Leaves: Your Biggest Risk

The most common trade secret concern for small businesses is the departing employee — someone who leaves with customer lists, pricing data, or operational knowledge, often to join a competitor.

What the Law Allows (Without a Contract)

Even without a written agreement, employees have a common-law duty of good faith during employment, which prevents them from actively using their employer's confidential information to compete. However, after employment ends, the protection is narrower. An employee can:

• Use the general skills and knowledge they developed.
• Work for a competitor.
• Solicit their former employer's clients (in most cases) — unless a contract says otherwise.

They cannot:

• Take and use genuinely confidential information such as customer lists they compiled at work.
• Actively misappropriate trade secrets for a competitor.

What a Contract Can Add

A well-drafted employment agreement can include:

• Non-solicitation clauses — preventing the former employee from poaching clients or other employees for a defined period and geography.
• Non-compete clauses — in Ontario, these are scrutinized closely by courts and must be reasonable in scope, geography, and duration to be enforceable. Broad, unreasonable non-competes are regularly struck down.
• Confidentiality provisions that survive termination.

Post-employment restrictions must be carefully drafted. A clause that is unreasonably broad may be found unenforceable, leaving you with no protection at all.

Remedies for Breach

If a trade secret is misappropriated or confidential information is disclosed in breach of an NDA, Ontario courts can grant:

• Injunctions — court orders requiring the person to stop using the information and return materials.
• Damages — compensation for the economic harm caused.
• Accounting of profits — the wrongdoer pays over the profits they made from using your information.

Courts have ordered injunctions in trade secret cases promptly — time matters when secret information is being actively used by a competitor. The moment you suspect misappropriation, get legal advice quickly.

Frequently asked questions