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Intellectual Property

U.S. disclosure principle could prove useful for Canadian firms

Although courts have been reluctant to enforce non-compete clauses in Canada, a similar principle used south of the border could be useful for companies hoping to prevent former employees from disclosing trade secrets to competitors, says Toronto IP lawyer John Simpson.

In the recent U.S. case of Brink’s Inc. v. Patrick, Simpson says the court prohibited an ex-employee from taking a job with a direct competitor as, by doing so, “he would inevitably disclose his employer’s proprietary confidential information.”

Simpson tells AdvocateDaily, “The doctrine of ‘inevitable disclosure’ has come out of U.S. employment law and essentially what it says is that when an employee departs for a competitor or leaves an employer to go to any other business, in circumstances where they would be inevitably using or disclosing their employer’s confidential information or trade secrets, then the court can grant an injunction preventing them from doing that.”

Although it has yet to be accepted in Canada, this principle, says Simpson, suggests a framework for how Canadian companies might protect their confidential information while not restricting a former employee’s ability to earn a living.

“I think it has certain logic to it," he says. "If the court is going to recognize trade secrets and confidential information as intellectual property then it certainly makes sense that they should grant injunctions to protect it, the same way that they do with trademarks, copyrights and patents.

“And so its application could be a way of drafting employment agreements where you have a clause that says that the employee acknowledges that going to work for a competitor would inevitably result in a breach of their non-disclosure obligations. That’s something that the court might be more inclined to accept than the employee agreeing not to compete. It becomes more about protecting an intellectual property right than it is about restricting their ability to carry on a livelihood," he says.

“It’s a potentially helpful way of protecting confidential information through contracts or through arguments in court.”

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