Breach of Confidence:

Question:Can a business sue for misuse of confidential business recipes or processes under Ontario breach of confidence rules?

Answer:Yes, in Ontario you can pursue a breach of confidence claim where the information has the necessary quality of confidence, was communicated in circumstances importing an obligation of confidence, and was then misused to the detriment of the disclosing party, as described in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574.   A licensing or “access” arrangement (for example, recipes, proprietary software, manufacturing processes, or marketing systems) can still lead to liability if the recipient uses the information beyond the permitted scope or after termination.   If you are dealing with suspected misuse, Legacy Legal Services can help legal professionals and businesses quickly assess facts, identify the right claim strategy, and document next steps, call (226) 246-3825 for support in Ontario.

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Misused Business Secrets

The success of a business may rely heavily upon secret recipes, proprietary software, unique systems, and customized processes; and accordingly, information relating to these key aspects may be highly valued with misuse of such confidential information quite harmful. In tort law, breach of confidence involves the wrongful use of information that was openly shared with the party that subsequently misuses the secretive information; and in this respect, breach of confidence differs from theft of trade secrets which would involve an element of misappropriation.

Note: Please contact Legacy Legal Services by phone at: (226) 246-3825 to discuss any specific questions that you may have.

The Law

Per the Supreme Court in the case of Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, the elements requiring proof so to constitute a breach of confidence case are:

• The information conveyed was confidential;
• The information was communicated in confidence; and
• The information was misused by the party to whom it was communicated.

Specifically, per Lac Minerals Ltd., the Supreme Court said:

As a particularly interesting example case, Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142 involved the licensing of the recipe for Clamato juice by Duffy-Mott (a company later acquired by Cadbury Schweppes Inc.) to Caesar Canning who then contracted production to FBI Foods Ltd.  After Cadbury Schweppes acquired Duffy-Mott, Caesar Canning was notified of termination of the licensing agreement; however, FBI, who later acquired assets of Caesar Canning, made use of the recipe despite a lack of authorization to do so.

Conclusion

Improper use of secretive information may constitute as the tort of breach of confidence where information was confidential, information was communicated within a confidential context, and the information was then misused by the party that received the communication.