Legal protection of software in the United Kingdom

Legal protection of software in the United Kingdom

JANUARY - THE C O M P U T E R LAW AND S E C U R I T Y REPORT FEBRUARY INTELLECTUAL PROPERTY information into contracts of employment. In Faccenda n...

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INTELLECTUAL PROPERTY information into contracts of employment. In Faccenda names and addresses of customers; the most convenient routes to them; their usual requirements; the day of the week and times of day when deliveries were made to them and the prices charged to individual customers were held neither collectively or individually to constitute confidential information. The Court left open the question whether additional protection should be offered by the law where the ex-employee is selling such information for gain rather than seeking to earn his living by using it. Information will not remain confidential once it has entered the public domain but cases show that partial publication of information - eg. in patent specifications - need not to be fatal and the Courts will prevent a Defendant from obtaining an unfair headstart or springboard such as where information which he took in confidence has just entered the public domain but its full implications may not be appreciated without further work - eg. reverse engineering.10 It is also necessary for the Plaintiff to show that the information imparted by him to the Defendant was imparted in circumstances of confidentiality. The best way of achieving this is by expressly stipulating it in a clause in a contract. In the absence of such contractual clause the Courts are prepared to infer circumstances of confidentiality where the ubiquitous "reasonable" man would do so. 11 The law is unclear as to the position of third parties in breach of confidence actions. If the third party knows from the outset that the information he obtains is confidential then he has no defence but what if he receives the information innocently and then perhaps acts on that information to his detriment in the sense of altering his position, probably expending costs in doing so, as a result of it? If he is then informed that the information was confidential can he be injuncted from using or disclosing that information or made to pay damages? There is support in the cases for both of these propositions but the position has not been definitively received. More seriously the Law Commission report refers to the glaring inadequacy of the present law of confidentiality in cases where information is improperly obtained. For example, in the case of casual eavesdropping the Malone12 case indicates that the law of confidentiality affords no protection. There may of course be some criminal remedy available where information is stolen. However even that is uncertain. The 1979 case of Oxford v Moss 13 confirmed that information cannot be as such stolen while the recent Prestel hacking case TM shows that hacking is not an offence under the Forgery and Counterfeiting Act

LEGAL PROTECTION OF SOFTWARE IN THE UNITED KINGDOM The principal areas of law to which one looks in the U.K. for the legal protection of software are patents, confidentiality and copyright. In this article I shall look at each of these in turn.

Patents The first area I shall touch upon is patents but I shall not spend long on this. In practice patent protection appears to be rarely a practical solution for those involved in software development. This is not only because of the effort (and cost) it takes to secure such protection and the fact that the patent specification must be published for all the world to see: but also because few computer programs will contain the necessary degree of novelty and inventiveness to qualify for patent protection in the first place.1 Of course once a patent is obtained it confers a genuine monopoly on the owner and in this respect is far less restricted than the law of confidentiality and of copyright, neither of which can prevent the independent creation and marketing of goods. Suffice it to say that although computer programs "as such" are expressly unpatentable under the Patents Act 1977,2 there seems to be no reason why in theory a patent should not be granted for a computer programmed in a certain way in order to solve a particular problem. This was the position before the 1977 Patents Act3 and the European Patent Office Guidelines of 6th March 19854 suggest that it should continue to be so.

Confidentiality I now turn to a second substantive body of law highly relevant to the protection of computer programs and that is the law of confidentiality and trade secrets. Although the 1981 Law Commission Reports on this subject recommends that it should be made the subject of legislation, the current position is that the relevant law in this area has been formed through the development of the common law and equity through individual cases over a long period. There is no doubt that the law of confidentiality has been widely used, particularly in the United States, as a means of protecting computer programs. 6 However although it is apt for this purpose in certain circumstances, as a result of its historical development, the scope of the protection afforded by the U.K. law of confidentiality is uncertain. English Courts now regard the legal duty of confidentiality as one deriving from an equitable obligation of good faith although not confined to fiduciary relationships such as master/employee. 7 It is necessary in order for a Plaintiff to succeed in an action for breach of confidence to show first that the information is truly confidential and not in the public domain. 8 In the field of employer/employee relationships, where the law of confidentiality is very often raised, the test of what is confidential is an onerous one in the light of the decision of the Court of Appeal in 1986 in the Faccenda Chicken9case. While an employee's duty of good faith to his employer during the subsistence of his contract of employment largely protects the employer, once that employment is at an end probably only genuine trade secrets such as chemical formulae or secret methods of manufacture are protected by the law and the employer cannot get better protection by putting restrictive covenants against the use or disclosure of non-confidential

1981. Finally, the Plaintiff must show actual or imminent breach of the duty of good faith on the part of the Defendant in relation to his confidential information. The detection and proof of a breach of confidence share many of the difficulties encountered in seeking to establish infringement in copyright cases. However, in addition there is the problem of showing that what has been taken from any given computer program is confidential. In the case of mass-market software it may plainly be very difficult to show this at all. Even in the case of bespoke application software it may be difficult to show which part of a program is confidential and which is merely part of the "state of the art." So there are problems with the law of confidentiality so far as contracts are concerned. It will greatly assist in a

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his work and that of the Defendant and that the Defendant has copied le his work. In practice proving infringement can be very difficult and the Plaintiff will wish to pass the onus of proof onto the Defendant to show that he did not copy by establishing all the points I have indicated together with the fact that the Defendant had an opportunity to copy and possibly that the objective similarity between the works is striking. 19 It was thought for some time before the passing of the 1985 Act that computer programs should be considered as literary works within the nomenclature of the 1956 Act. The 1985 Act confirmed that computer programs are indeed to be treated as such 2o and this is repeated in the Bill in terms which state that a computer program actually is a literary work. 21 It is important to note in passing that a number of computer related works such as algorithms, flowcharts, visual displays and semi-conductor chips, not being computer programs, do not fall within this definition. In some cases such works may gain copyright protection under the 1956 Act as artistic works. However in the case of semi-conductor chips, sui generis legislation has become necessary as a result, first, of the Semi-Conductor Chip Protection Act 1984 in the United States and secondly of the EEC Directive for Protection of Topographies of Semi-Conductor Chips of 16 December 1986. The EEC Directive required member states to have brought in compliant legislation by 7 November this year at which time reciprocal protection afforded to certain foreign countries including the U.K. under the United States legislation would in any event have expired in the absence of such legislation being passed. A U K statutory instrument has now accordingly been passed, known as the Semi-Conductor Products (Protection of Topography) Regulations 198722 which came into force on 7.11.87. In compliance with the Directive these regulations give the owner of a topography the exclusive right to reproduce it: sell, hire offer or expose it for sale or hire, or a semi-conductor product incorporating the topography, or to import any such reproduction or products into the UK. There is an important exception to this in the case of reverse engineering, i.e. the making of any reproduction for the purpose of analysing or evaluating the topography in compliance with the EEC directive. Also in accordance with the directive the regulations provide that rights in a topography shall cease either at the end of the tenth year after they were first commercially exploitec; or within a period of 15 years commencing with their creation. It is important to understand that UK copyright law is rather different from that of some other countries both in the absence of any registration system or formal requirements for the coming into being of copyright and in the absence of any requirement of aesthetic merit. In consequence the author of a functional engineering drawing enjoys copyright in it as recently illustrated in the famous British Leyland case. 23 Railway timetables can enjoy copyright.24 All that effectively must be shown is that skill and effort has been expended by its author. In one case the court opined that what is worth copying is worth protecting. 25 Under the 1956 Act a literary work must have been reduced to writing or some material form. The 1985 Act expressly makes clear that storage of a program in a computer constitutes reduction to material form for this purpose. 26 However the use of the word "storage" does leave some doubt as to the situation where work is not deliberately stored but merely temporarily posted to RAM. Furthermore the 1986 Government White Paper, which rounded up a series of

subsequent action for breach of confidence if the software owner/employer has expressly provided in his contracts that the material in question is to be regarded as confidential and not to be disclosed and has introduced a system to limit acces to it. Further if he has stamped accompanying documentation as being confidential. In the Faccenda case the Court of Appeal deemed it relevant to enquire whether the employer had impressed on his employee the confidentiality of the information. As a means of facilitating proof of copying - relevant both to confidence and copyright actions - the software house may also wish to consider a means of inserting invisible "fingerprints" in its software eg. self-cancelling routines. It is also important to incorporate in an employee's contract of employment a description of his job and duties. Again, the Court in Faccenda thought it relevant to consider whether the employee was used to receiving confidential information and it may in any case be very helpful for an employee to be able to show that the employee was employed precisely in order to work on the matter involving the confidential information. The inclusion of such a clause is also highly important for the purpose of copyright law because in the absence of an express clause in the contract it is only works created during the course of an employee's employment which are vested in his employer and not those done, as it were, on the side. Although the legal doctrine against restraint of trade and the limitations of the Faccenda case have to be respected in their drafting, clauses which restrict an employee's right both during and after his employment to disclose trade secrets or to work for a competitor are both common and desirable, is Apart from anything else they act as a deterrent to ex-employees. They can also, it appears, operate to prohibit an ex-employee from soliciting customers (which would not be covered by an implied term) and possibly matters which he recalls from his employment but has not expressly memorised. Finally, they can deal with matters not in existence at the time of the contract. Copyright I must now turn to the law of copyright which is generally thought to be the most apt of all forms of legal protection for software. Copyright law in the U.K. is presently governed by the Copyright Act 1956 and subsequent amending statutes, in particular (so far as relevant to software) the Copyright (Amendment) Act 1983 and the Copyright (Computer Software) Amendment Act 1985 - which came into force on 16th September 1985. Following the Government's 1986 White Paper's 16 recommendations on the subject, a new "Copyright Designs and Patents Bill" has been introduced in this session of parliament and is currently being considered in the House of Lords. (See Adrian Sterling's article ante). Such an Act is generally long overdue. It can be expected to be passed into law in the current session of Parliament although, even when it becomes law, it will have transitional provisions applying to works or infringements beofre its commencement. Consequently we shall for a while have to grapple with both the old and new copyright legislation. In order to succeed in an action for copyright infringement a Plaintiff must show first that copyright subsists in his work and that he owns that copyright if the Defendant puts these matters in issue. In the new Copyright Bill these matters will be presumed unless evidence to the contrary is shown. 17 He must further show that there is objective similarity between 11

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proposals for improving the law in all areas of intellectual property law, recognised that the position is uncertain where a work is created neither in writing nor in computer memory but, for example, on media unattached to a computer at the time of creation. The White Paper proposed 27 new legislation to make it clear that copyright subsists in works fixed in any form from which they can in principle be reproduced. The Copyright Bill deals with these points. Section 3(2) provides that copyright subsists in a literary works once "it has been recorded, in writing or otherwise." Section 161 defines "writing" as any form of notation or code whether by hand or otherwise and regardless of the method by which or medium on which it is recorded. Another important proposition of copyright law to understand is that UK copyright law protects not ideas but the form of expression of those ideas. 28 Usually that distinction is relatively straightforward to draw in practice. However, there has recently in the United States been a whole series of cases which have become known as the "look and feel" cases 29 in which Plaintiffs have sought to prevent Defendants not only from copying their source codes but from copying the overall structure and organisation of their programs, even without access to their source codes, i.e. the look and feel of those programs. Space does not allow me to go into these cases in detail and in any event they are very fully reported and commented in the computer press. Suffice it to say that Plaintiffs in American Courts have had some considerable degree of success in hitting out at clones in respect of "look and feel." Whether they will do so in English Courts is in my view much less certain. The T h r u s t ¢ o d e case 30 suggests to me that they will not. Under the 1956 Copyright Act, a literary work must have a human author and copyright then subsists in that work for his life plus 50 years. 31 What about computer generated works and in particular expert or artificial intelligence systems? Is the "author" (a) the creator of the program that controls the computer, (b) the originator of the data upon which the computer operates to create the new work, (c) the person responsible for running the computer to produce the work or (d) the computer owner? In the Express Newspapers case32 the High Court, at the interlocutory stage, was happy to hold that there was literary copyright in a sequence of grids generated by the Plaintiff's newspaper for the purpose of their "millionaire of the month" competition. It took the view that the computer had simply been the tool by which the programmer had achieved his desired result and that he was therefore the author of the work. This analogy is unlikely to help in the case of computer generated works. The White Paper recognised this problem but decided, unhelpfully, that no specific legislation would be made to answer the question. 33 Instead it suggested one must look at each case on the facts to decide who, if any one, has provided the essential skill and labour as with cases of joint ownership. The British Computer Society suggested, instead, that the creator of the work in such cases should be defined as "the person by whom the arrangements necessary for the making of that computer output or computer generated work are undertaken." This seemed a very sensible suggestion and one which has always applied mutatis mutandis to cinematograph films under Part II of the 1956 Act. It has now been adopted in the Bill which provides that the duration of such copyright will be 50 years from the end of the year in which the work was made. 34 From the practical point of view it is essential to remember,

and make provision in one's contracts for the fact that, under Section 4 of the 1956 Act (and corresponding provisions in the new Bill) works created by an employee in the course of his contract of employment will vest in his employer but works created outside the course of his employment, or indeed by someone who is not an employee such as an independent contractor will not vest in anyone other than the author unless a contract expressly provides for this. In fact there is some authority that in these circumstances the law would treat the party who had paid for the software as being entitled in equity to it35 but the only safe way of proceeding is to make ownership of copyright an express provision in all contracts both with outside agencies and with employees. The Acts restricted by copyright in a literary work which give rise to "primary infringements" under $2(5) of the 1956 Act are (a) reproducing the work in a material form (b) publishing the work (c) performing the work in public (d) broadcasting the work (e) causing the work to be transmitted to subscribers to a diffusion service (f) making any adaptation of the work (g) doing, in relation to an adaptation of the work, any of the acts specified in relation to the work in paragraphs (a) to (e). Reproduction in material form of a literary work under the 1956 Act does not have to involve complete reproduction but just reproduction of a substantial part36 and substantial does not necessarily mean substantial in physical terms. The more original and important to the whole is the part taken the more it is likely to be considered substantial 37. This concept of "substantial part" is kept in the Bill in relation to the new offence of "copying ''3s. As I have said, the 1985 Amendment Act provides that storing a program in computer memory amounts to reducing or reproducing it in material form. It would appear therefore that the mere act of loading a computer program into a computer without consent of the copyright owner constitutes infringement. However, the Bill provides that storing a work in a computer does not amount to copying the work where such storage is done only incidentally in the course of viewing the work or, in the case of a computer program, running the program 39. As we have seen, the Bill in fact does away with the concept of reproduction in material form altogether and replaces it with the offence of "copying". This resolves the problem where a computer program is copied onto media not connected to a computer and hence arguably not in material form. The White Paper recognised that this area had been left uncertain by the 1985 Act and had proposed legislation to provide that reproduction in material form extends to copying by fixing a work on any medium from which it can in principle be reproduced 40. The 1956 Act makes it clear 41 that making an adaptation of a literary work (e.g. a translation of it) or reproducing in material form an existing adaptation of a work constitutes infringement of the copyright in that literary work. The 1985 Act expressly provides that a version of the program in which it is converted into or out of a computer language or code or into a different computer language or code is an adaption 42, Consequently object code is an adaptation of its source code and even if there may be no independent copyright in that object code, should it be copied by someone,

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be concerned as to his position in the event that the supplier disappears or withdraws support in breach of contract. These matters are best dealt with by a source code escrow agreement whereby the supplier's source code is lodged with an independent body and the customer is allowed access to it in certain prescribed circumstances. If the customer is to be allowed to make modifications to the software it is desirable to ensure that he notifies the supplier of such modifications so that the latter can benefit from any improvements. It is important that the customer should be obliged to notify the supplier immediately should he become aware of any infringement of the supplier's intellectual property rights, it is a fundamental principle that a Plaintiff must move swiftly in order to obtain an interlocutory injunction and his right to such relief may be lost if he does not. It is vitally important in a licence to provide expressly that the software and all related documentation is confidential and must be treated as such and to require the customer to preserve such confidentiality and to ensure that such of his employees who need access to the software do likewise. On a practical point, the licence should make it clear that all software and related materials will be returned to the supplier after termination of the contract. Finally a word of warning to suppliers to avoid slavish copying of licence clauses taken from previous deals or precedent books. Each iicence needs to be looked at as a separate contract on its own facts.

such copying will constitute infringement of the source code since the object code is regarded as an adaptation thereof. The Bill reproduces this terminology43. The main remedies in respect of copyright infringement comprise an action for damages or inquiry as to profits, a claim for delivery up of the infringing goods and injunctive relief. It is worth noting that the current right to claim additional damages in conversion (upon the basis that an infringing item is treated as if it were the property of the Plaintiff) is removed, upon the recommendation of the White Paper, by the Bill. It is also worth noting the increased remedies available under the criminal law in respect of software piracy. The 1983 Copyright Act increased penalties in relation to film and soundrecording piracy and empowered a J.P. to issue a search warrant to allow a constable to search premises and seize articles he reasonably believed to be evidence of an offence. The 1985 Act extended these powers in relation to an "infringing" copy of a computer program. The Bill preserves these powers.

Licences Finally, in the light of the above, I turn to the types of contractual terms which a supplier may wish to insert into his licences in order to protect his intellectual property rights. In doing so I disregard all the other necessary clauses which such licences must have. By using the term licence I am assuming that the supplier retains copyright in the software - as is nearly always the case except in certain bespoke contracts - and is merely prepared to allow another party to use such software for a certain period and upon certain terms. Usually such licences will be non-exclusive so that the licensor may market ths software elsewhere. If the licence is to be exclusive then particular care has to be taken with regard to EEC competition law with which I shall not deal here. At the risk of stating the obvious, it is very important precisely to define the software and indeed any other material which is to be the subject of the licence and in which the supplier retains copyright. The same is true as to the duration of the licence and the terms, if any, upon which it may be renewed. Silence, or ambiguity, as to any of these points can lead to untold confusion and problems. One of the main points with which the licence has to deal is the extent to which the customer is going to be limited in the purposes to which he can put the software. This will be a matter of negotiation but the licensor must bear in mind that large customers will have many sites and many machines upon which the software could be used and it is a question of setting the appropriate fee or fees in the light of such use. It may not be of much use to the supplier to restrict the use of the software under the licence unless he acquires inspection rights for himself in the contract so that he can check to see that it is being complied with. Another case where this point is of relevance relates to the customer's rights, if any, to take copies of the programs. Under English copyright law the customer has no express statutory right to do this although arguably he might have an implied licence. Plainly he is likely to need such a right for backup purposes but the licence should spell out those circumstances. The licence must not only define who owns the software being licensed but should also deal with the problem of ownership rights in any modifications or alterations which the customer may make to the software - if indeed he is to be given that right at all. Even if the customer does not generally have the right under the licence to modify the software, he is likely to

Richard Dedman partner, Barlow Lyde and Gilbert, Solicitors. This article is based on a talk given by the author at an ESC Conference relating to "Success with Computer Contracts" on 14th October 1987.

Footnotes 1. See "International Trends in Computer Program Protection" by Jack E. Brown. Computer Law & Practice May/June 1987where less than one per cent of all programs is estimated to be sufficiently inventive. 2. s1(2). 3. Slee and Harris's Application [19661 RPC 194; Badger's Application [1970] RPC 36 4. "... if the subject matter as claimed make a technical cont#bution to the known art, patentability should not be denied merely on the ground that a computer program is involved in its implementation. This means for example that program-controlled machines and program controlled manufacture and control process should normally be regarded as patentable subject matter."

5. 6. 7. 8. 9.

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No 110 1981 Cmnd 8388. In "Computer Software: Legal Protection in the UK" Henry Carr gives WIPO statistics to the effect that in 1980, 78% of U.S. softwarefirms reliedon trade secretslaw to protecttheir interests. Frazer v Evans [1969] 1QB 349. Saltman Engineering v Campbell Engineering (1948)65 RPC 203. FaccendaChicken Ltd. v Fowler [19861 1All ER 617.The Court of Appeal in this case considered there were four matters of particular importance in determining whether, in the absence of an express term in the contract of employment, a duty of confidentiality should be implied after termination, namely (i) nature of the employment (ii) nature of the information (iii) whether employer impressed on employee the confidentiality of the information (iv) whetherthe relevantinformationcan easily be isolated from other information which the employee should be free to disclose.

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THE COMPUTER LAW AND SECURITY REPORT 29. Synemom Technology v University Computing Co. 199 USPQ 537 (1978); Whelan Associates Inc. v Jaglow Dental Lab. 797 F2d 122 (3rd Circuit 1986); Broderbund Software Inc. v Unison World Inc. No. C-85-3457 WHO, Slip. Op. (ND Cal. 8/10/1986); Plains Cotton Corp. v Goodpssture Computer Service Inc. 807 F. 2d 1256 (5th Circuit 1987); Digital Communications Associates Inc. v. Softklone Distribution Corporation et sl 86-128A, 31 March 1987; See also articles: Hilary E. Pearson : "The last days of the Clones? Protecting the "look and feel" of software - Computer Law & Practice Jan/Feb 1987". Hilary E. Pearson : "Second thoughts on "look and feel" Copyright Protection for Software" Computer Law & Practice May/June 1987". Michael Daily : EIPR August 1987 case comment. 30. {1983J FSR 502. 31. Section 2(3). 32. 1985 FSR 306; I19851 3 AUER 680 33. Paragraphs 9.6, 9.7 and 9.8. 34. Sections 9(3) and 12(3)(b). 35. Harold Drebble Ltd. v The Hycolite Manufacturing Co. 1928 44 TLR 265. 36. $49(1). 37. Ladbroke (Football) Ltd. v William Hill (Football) Ltd. 1964 1 WLR 273. 38. $16(3)(a). 39. $17(7). 40. Para 9.5. 41. Section 5. 42. Section 1(2). 43. Section 21(4).

10. Terrapin Ltd, v Builders Supply CO. (Hayes) Ltd. 11967]RPC 375 11. CoCo v A.N. Clark (Engineers) Ltd. [1969] RPC 41 12. Malone v Metropolitan Police Commissioners [1979] 2 ALL ER 620; contrast Prince Albert v. Strange (1849) 1 MoE + G25 and Mordson v. Moat (1851) 9 Hare 241. 13. [1979] Crim, L.R. 119 DC 14. Times 21 July 1987. 15. For an example of a recent case where an employer successfully relied on such a clause see Evening Standard v. Henderson; (1987) 13 FSR 165. 16. "Intellectual Property and Innovation" 1986 Cmnd 9712. 17. $94 of the Bill. 18. $17 of the Bill introduces the concept of "copying" as a restricted act. Under the 1956 Act this was called reproduction in material form. 19. L.B. (Plastics) Ltd. v Swish Products Ltd. I1979j RPC 551 20. $1(1) Copyright (Computer Software) Amendment Act 1985. 21. $3(1) (6) of the Bill. 22. $7 1987 No 1497 23. British I.m/land v Armstrong Patents CO. 1984 FSR 591. Partly as a result of this decision the Bill, in Part Ill, introduces a new design right in relation to the design of industrial articles providing the designer with a maximum 15 years protection subject to licences of right to copy (upon terms) after 5 years. Such design must be "original" and not "commonplace" in order to obtain protection. 24. Blackrock & Co Ltd v C. Arkhuer Pearson Ltd [19151 2Ch 376. 25. University of London Press Ltd v University Tutorial Press Ltd [1916] 2Ch. 26. Section 2. 27. Paragraph 9.4, 28. Hollinrake v Tru~vell [1894[ 3Ch 420; Brigid Foley Ltd. v Eliot and Othem [19821 RPC 433. See also US case of Baker v Selden 101 US 99,

TRADE SECRETS REFORM THE DEVELOPMENT OF TRADE SECRETS LAW IN CANADA

is made out, there is some difficulty over the existing remedies. Fourth, there are difficulties in the existing law as to some of the defences a defendant may mount, In particular there has been much concern over the so-called "public interest" defence. Fifth, there is Australian authority that suggests that a right to the protection of a confidence is not assignable. At least so far as the doctrine of breach of confidence is concerned it appears that the "right" is a purely personal one and does not have proprietary characteristics. As to the criminal law, it is standard learning in the United Kingdom and elsewhere in the Commonwealth (but not in Canada) that information cannot be stolen. There is authority in Canada - presently being appealed to the Supreme Court - which holds that at least some kinds of proprietary computer-derived information can be stolen. (See Hammond, Theft of Information (1984) 100 L.Q.R. 252). Given the importance of trade secrets in high technology and commercial practice and the difficulties of the present state of the law, it is not surprising that sooner or later a Canadian law reform agency would either take on or be assigned the task of looking to this area. In February of 1984 the Alberta Institute of Law Research and Reform (which is the provincial law reform agency) issued a consultative report, Protection of Trade Secrets. The report attracted some attention. Although it dealt only with the civil law protection of trade secrets, the Report came to the attention of a working group of senior government officials - the Deputy Ministers Responsible for Criminal Justice in the various Canadian

Introduction

The legislative development of trade secret law in Canada is proceeding steadily. This note outlines the developments to date, the nature of the proposals, and the likely course of their implementation. Background

Prior to the initiatives under review, Canadian trade secret law stood essentially on the same footing as the law elsewhere in the British Commonwealth. That is, if a trade secret is to be protected at all, resort has to be made to doctrines of general application. These are drawn from contract, tort, equity or property based causes of action. The difficulties with the judge-made causes of action are well enough known. First, to bring them into play there must be in existence some kind of prior relationship between the parties which the law can then classify in accordance with the established legal taxonomy. But in cases of industrial espionage there is routinely no such prior relationship. The result is that industrial espionage per se may not be actionable. This of course was what concerned the U.K, Law Commission in its report on Breach of Confidence. Second, even where there is some kind of relationship courts and commentators have had great difficulty dealing with the situation of the third party who innocently acquires information in good faith from the thief. Third, even when a cause of action 14