Breach of Confidence:

Question: In Ontario, how do you prove breach of confidence when someone misuses a business recipe or proprietary process the other party shared under NDA?

Answer: In Ontario, you can pursue a breach of confidence claim when the other party used information that had the necessary quality of confidence, was communicated in circumstances importing an obligation of confidence, and was then misused in an unauthorized way that caused detriment, as set out in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574.  This framework also fits scenarios like Cadbury’s recipe misuse discussed in Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142.  If you believe your confidential business information was misused, Paladin LLP can help you assess evidence, map the confidentiality context, and outline next steps for a timely resolution, call (289) 925-1572 for a free 1-hour consultation.

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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.

The Law

As per the case of Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, a Supreme Court decision, the elements that must be proven within 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.