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Top court rules against Merck in trade secrets case

A night time photo of the Supreme Court of Canada building in Ottawa. The 6-3 decision is a victory for advocates of more open government and it raises the bar for companies who rely on exemptions in the act to block the release of documents that might contain sensitive corporate information.

JIM YOUNG/jim young The Globe and Mail

The Supreme Court of Canada issued a landmark ruling Friday on what constitutes a corporate trade secret under the Access to Information Act.

The 6-3 decision is a victory for advocates of more open government and it raises the bar for companies who rely on exemptions in the act to block the release of documents that might contain sensitive corporate information that could hurt their business.

The high court was ruling on a dispute involving an unidentified access requester, Health Canada and the pharmaceutical firm Merck Frosst Canada that dates back more than a decade.

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The Supreme Court ruled that the company didn't adequately make the case to keep certain documents secret under the act.

The case was sparked when the requester sought access to correspondence between the company and the government department on the approval process for an asthma drug.

Friday's decision marked the first time that the country's highest court has ruled on the exemptions outlined in Section 20 of the act. The exemptions allow the government to keep documents from disclosure if they are deemed to be "trade secrets" that could compromise a company's corporate advantage with competitors.

The company sought judicial review of the matter and was successful in the Federal Court, which ruled that the government contravened the spirit of the act when it released several pages of censored documents without consulting the company.

In 2009, the Federal Court of Appeal ruled in favour of the government and said the documents should have been released. It also ruled that Health Canada's disclosure of the documents did not contravene the spirit of the act.

Merck lost its Supreme Court appeal of that decision.

"It is particularly important to allow broad access to this sort of information in the context of the pharmaceutical industry," Mr. Justice Thomas Cromwell wrote for the majority.

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He said Merck had not shown that any of the material at issue contained information that should have been exempted under Section 20.

Judge Cromwell ruled that Health Canada should have consulted the company before releasing some documents, but added that the failure to do so did not ultimately harm the company.

The judgment said companies should work with government departments to determine what is and isn't a trade secret that should be covered by an exemption.

Companies have argued against such a practice because they say it takes time and costs money.

"However, it may be useful to observe that the impression I have is that both Merck and Health Canada at times took rather extreme positions that were not in accordance with the purpose, letter or spirit of the act," Judge Cromwell wrote.

"It is to be hoped that the clarifications that I have set out above will lead to more constructive and co-operative approaches to these issues in the future."

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In dissent, Madam Justice Marie Deschamps sided with Merck Frosst and backed the Federal Court trial judge who originally heard the case.

Judge Deschamps wrote that because the trial judge heard the complex case in its entirety, he was in a better position to render a decision than the various appeal courts – including her own – that have since weighed in.

The case has been argued and re-argued five times before the two levels of Federal Court dating back to 2001, creating a small library of 67 bound volumes of transcripts and evidence.

In Friday's ruling – which at more than 130 pages was unusually long – Cromwell upheld the position that a trade secret is information that "is known only by one or a relatively small number of persons" and "must be capable of industrial or commercial application." As well, "the possessor must have an interest (e.g. an economic interest) worthy of legal protection."

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