Clear As Mud – The Rub On Trade Secrets

Clear As Mud – The Rub On Trade Secrets

Mar 27, 2026 | Blog

Written by Zach Nickels and Nicolas Auger

Opening day is right around the corner, you smell fresh cut grass, you hear the ballpark franks sizzling on the grill and see the baseballs rubbed in mud. Yes, a little-known fun fact about baseball is that each baseball is rubbed with mud before play to remove the gloss and slick feel of the ball. This seems like the tradition of a bygone era, but there is reasoning behind it and a story of ingenuity.

Originally, baseballs were rubbed with either infield soil or sometimes even tobacco juice to give them grip and remove their glossy finish. Then, in 1938, Lena Blackburne, a third-base coach for the Philadelphia Athletics, set out to find a better substance that could achieve these results without damaging the leather surface of the ball.

Blackburne discovered the perfect substance: mud from a secret location in New Jersey on the banks of the Delaware River. This special mud, once aged and subjected to secret processes, provides the perfect composition for grip on the ball and an appropriately tinted finish when rubbed onto the surface of the baseball. The mud makes the ball perfectly grippy for the pitcher while reducing its shine so that batters can still see it.

After coming across this discovery, Blackburne founded the company “Lena Blackburne Baseball Rubbing Mud” and proceeded to gather and sell this mud to Major League teams. By the 1950’s, it was used by every single team in the League.[1]

So, what makes this mud so special? Well, according to a 2024 study from the National Academy of Sciences, the mud works because it fills the pores in the ball’s leather surface leaving a residue that almost doubles its cohesion with human skin with tiny clay particles that create a “studded” surface, thereby enhancing friction between the baseball and a player’s hand. Even today, this proprietary mixture has not been replicated elsewhere.[2] To this day, the Lena Blackburne Baseball Rubbing Mud company is the only source of this special mud for the MLB.

The obvious question on every baseball fan’s mind: how is this protectable? Can this even be considered intellectual property? Blackburne didn’t invent the mud, nor can you trademark the signature texture and feel of the ball. This is where the humble, yet potentially powerful trade secret goes to bat.

Trade secrets can be a very formidable tool in protecting what could otherwise be protected by traditional forms of intellectual property (such as inventions protectable by patents), or subject matter which cannot be considered intellectual property in the traditional sense (such as a recipe). However, trade secret efficacy depends on knowing how to “use” trade secrets.

The trade secret framework in Canada is regulated by common law (i.e., jurisprudence) as opposed to statute, and those who misappropriate trade secrets can be liable for breach of confidence, breach of fiduciary duty or breach of contract. Critically, once a trade secret is publicly known, it loses its protection. This is why it is of the utmost importance to have guidelines in place for keeping the trade secret… a secret.

To qualify as a trade secret, (1) the information must have commercial value, (2) the information must be secret (not publicly known), and (3) the business that “owns” the trade secret must take reasonable steps to keep it confidential. There are also various other factors a court may consider as to whether information is a trade secret such as: the value of the information, the cost in creating it, whether misuse resulted in detriment to the owner, and others. In Canada, trade secrets are treated much the same as confidential information. Courts can imply the duty of confidentiality and the tort of breach of confidence to provide monetary and importantly, injunctive relief and restrain use of the confidential information. The test to establish breach of confidence is set out in Lac Minerals Ltd. V International Corona Resources Ltd., consisting of three elements:  that the information conveyed was confidential, that it was communicated in confidence, and that it was misused by the party to whom it was communicated.[3] 

In the case of Lena Blackburne’s mud, the precise site of the mud harvesting, the layer of sediment it is taken from or any proprietary treatment of the mud could all be the subject of trade secret. Any related formulas, recipes, supplier/customer lists, specialized techniques and more could all be kept in confidence in protected as a trade secret.

Protecting a trade secret is no small task, but there are best practices to using them. For example, implementing a formal trade secret policy with your business or organization supported by technical and legal safeguards can help protect your trade secret. Internal controls such as restricted access, contractual protections and document management are also essential measures to incorporate in protecting a trade secret. Ultimately, effective guidelines and management of trade secrets preserve a company’s competitive advantage and can assist in reinforcing the information’s status as a trade secret when enforcement is needed.

The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

[1] Lena Blackburne rubbing mud a secret of the game | Baseball Hall of Fame

[2] Soft matter mechanics of baseball’s Rubbing Mud – PMC

[3]  1989 CanLII 34 (SCC), [1989] 2 SCR 574 at para 129.

When You Don’t Have To Tell All: Ontario’s Disclosure Exemptions and Exclusions Explained

Mar 4, 2026 | Blog, FAQ

By Gregory M. Prekupec and Rahul Gupta

Franchise disclosure is one of those topics every franchisor thinks they understand, until they realize the rules aren’t quite as black and white as they seem. In Canada, only the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Ontario, Prince Edward Island, and soon, Saskatchewan, require franchisors to provide a disclosure document.

But even in Ontario, the Arthur Wishart Act (Franchise Disclosure), 2000 (“AWA”) includes several instances where disclosure may not actually be required.

In plain terms: sometimes the obligation to disclose simply doesn’t apply at all (these are exclusions), and in other cases, franchisors are legally allowed to skip disclosure in specific situations (these are exemptions).

Why It Matters

Getting this wrong can cause more than just a paperwork headache. Missteps can delay closings, invite rescission claims, and leave both parties in a tricky position-imagine paying rent on a location you can’t yet operate because the cooling-off period hasn’t expired. On the flip side, properly relying on an exclusion or exemption keeps transactions efficient and compliant, while still protecting everyone involved.

That’s why clear legal guidance is essential. A franchise lawyer can confirm whether disclosure is required, explain how exclusions and/or exemptions apply, and help avoid pitfalls that could derail a deal.

The Key Categories

Exclusions – The AWA doesn’t apply at all in these cases:

  • Certain employment or partnership relationships
  • Trademark or certification-style licensing arrangements
  • Shared retail spaces where the smaller tenant isn’t required to buy from the larger retailer
  • Agreements involving the Crown or its agents

Exemptions – Disclosure rules apply generally, but these scenarios are excused:

  • Short-term or small-investment franchises (less than one year or under $15,000)
  • Large initial investments over $3 million
  • Experienced insiders or existing franchisees expanding their operations
  • Multi-level marketing structures
  • Franchise renewals or extensions
  • Estate sales or bankruptcy proceedings
  • Existing franchisee acquiring another unit
  • A sale of a franchise by an existing franchisee for the franchisee’s own account, where the franchisor’s involvement is limited and specified conditions are met.

The Takeaway

Relying on an exemption doesn’t mean a franchisor is cutting corners! It means they’re operating within the law’s boundaries. Still, many choose to disclose anyway for transparency, consistency, and peace of mind.

When in doubt, consult a franchise lawyer early. Understanding when disclosure isn’t required can be just as strategic as knowing when it is.

This article was first published on February 25th 2026 on elitefranchisemagazine.com

 

 

 

Canada Strong, Artists Stronger? The Case for an Artist’s Resale Right

Feb 24, 2026 | Blog

By Zach Nickels, Harneet Gill

 

Jean-François Millet - L'Angélus


Jean-Francois Millet’s “The Angelus” Painting https://www.musee-orsay.fr/en/artworks/langelus-345

 

On November 4, 2025, the Federal Government delivered Budget 2025, entitled “Canada Strong”, in which it expressed its intent to amend Canada’s Copyright Act to protect artists’ and creators’ copyrights. Specifically, the Federal Government has proposed creating an “Artist’s Resale Right”, which it describes as aiming to ensure that Canadian visual artists benefit from the future sales of their work.

Artist’s Resale Right Background

The Artist’s Resale Right concept was first borne-out in France in 1920 as droit de suite after Jean-Francois Millet’s The Angelus painting soared from its initial sale of 1,000 francs to a record 553,000 francs at auction, while his heirs lived in poverty sparking the Artist’s Resale Right movement.

In 1948, the Artist’s Resale Right was later added to Article 14ter of the Berne Convention. Article 14ter essentially states that an author, or after their death, the persons authorized by national legislation, shall with respect to original works of art and manuscripts of writers and composers, enjoy the “inalienable right to an interest in any sale of the work subsequent to the first transfer by the author of the work”. However, the entitlements under this right vary between jurisdictions, with some countries offering artists 5% of the total sale, others applying a sliding scale (2%-10%), and others yet allocating only the profit made on sales of the subject work.

As a practical example, let’s assume a Canadian painter sells their artwork for $5,500 in 2025. If resold at auction a decade later for $48,000 in France (an implementing nation), the artist receives approx. 4% ($1,920) via a collecting society, provided Canada’s law permits reciprocal claims. This real-world scenario highlights the importance of Canada’s pending reforms for artists globally.

A Canadian Proposal for an Artist’s Resale Right

In Canada, the Canadian Artists’ Representation/Le Front des artistes canadiens (“CARFAC”) and Le Regroupement des artistes en arts visuels du Québec (“RAAV”) jointly recommended that the federal government introduce an Artist’s Resale Right in Canada to apply to eligible secondary sales of artwork. Under their proposal, the right would cover the resale of original visual artworks during the artist’s lifetime and continue to benefit the artist’s estate for the duration of copyright protection. They further suggested that the royalty rate payable to rightsholders be set at 5% of the resale price and apply only to works sold on the secondary market for at least $1,000.

In terms of administration, the recommendation provides that both the art market professional (such as the gallery, dealer, or auction house) and the seller of the artwork should be jointly responsible for ensuring payment of the royalty. Finally, CARFAC and RAAV proposed that the management and distribution of these royalties be administered by the Canadian Artists’ Representation Copyright Collective (“CARCC”), which currently operates under the business name Copyright Visual Arts – Droits d’auteur Arts visuels.

Tension with Personal Property Rights

The creation of this right, however, has sparked debate since it extends beyond mere copyright to personal property rights, which fall under provincial jurisdiction. Section 3(1)(j) of the Copyright Act only captures the very first authorized sale or transfer of a physical copy of a work. Once the first sale is made, the buyer owns the tangible asset and subsequent sales of the work do not infringe the author’s copyright despite copyright in the work remaining with the author or assignee.

This concept is known as the doctrine of exhaustion (or first sale doctrine in the United States). Canada’s Copyright Act contains provisions that can be construed as embodying the doctrine of exhaustion, and its applicability has been confirmed by the Supreme Court of Canada in Théberge v. Galerie d’Art du Petit Champlain inc. Consistent with the doctrine of exhaustion, critics of the Artist’s Resale Right have argued that movable property must circulate freely and without hidden charges, and that the proposed legislation risks impeding that flow.

A Potential Detrimental Impact on Artists’ Initial Sales?

There is also an argument to be made about the potential for detrimental effects on artists’ financial interests resulting from an Artist’s Resal Right. For example, an anticipated resale royalty obligation under the Artist’s Resale Right could motivate the initial purchase to lower their offer on the initial sale, as buyers may speculatively discount what they are willing to pay to account for a future royalty.

Emerging artists often depend heavily on the initial sales of their works, and the potential downward pressure created by the Artist’s Resale Right could disproportionately affect them by reducing both the prices that their works attract and their potential volume of sales volume. In theory, this ripple effect could create difficulties for emerging artists to gain a foothold in the market, as their works could become comparatively less attractive than assets not encumbered by future royalty obligations.

Concluding Thoughts

In sum, a durable framework for Artist’s Resale Rights must work in practice across the full life of a work, for all players involved including artists, intermediaries, and collectors; Like all things copyright, a balance must be struck with respect to artists and owners alike.

In a balanced copyright ecosystem, artists should be able to participate in the long-term success and appreciation of their creations, and owners should have their expectations safeguarded when freely dealing with their personal property. Whether Canada’s proposed Artist’s Resale Right actually satisfies this balance has yet to be tested, but copyright owners and art collectors will certainly be watching with great interest.

Trademarks and Franchise Law: Two Peas in a Pod

Feb 6, 2026 | Blog, FAQ

By Gregory M. Prekupec and Rutendo Muchinguri

The relationship between Franchisors and Franchisees is focused on two related principles: (1) Franchisors grant rights to Franchisees to operate a business, and (2) Franchisees pay Franchisors to continue using the granted rights. Rights that are granted by Franchisors are, amongst other things, the use of a trademark, tradename, symbol, or logo that is owned or licensed by the Franchisor. It is at this initial point that franchise law intersects with trademark law, and it continues to be an important foundation for franchise system success for all parties throughout the franchise relationship.

At the outset, it is important to note that you cannot grant rights that you do not own or have the legal right to grant. Before Franchisors can grant any rights to Franchisees, they must have the legal authority to do so. More often than we like to see, Franchisors file trademark applications with the Canadian Intellectual Property Office (“CIPO”) without professional assistance. This is generally the first mistake, which then compounds other complications. It is rare that trademark applications filed without the assistance of a trademark lawyer or agent do not contain fundamental flaws that make them difficult to enforce down the road.

Compounding these flaws, Franchisors often assume that the mere filing of a trademark application means they have registered trademark rights. After filing, many Franchisors are unaware that there are several additional steps in the trademark prosecution process. Failure to respond properly to requests from CIPO Examiners frequently results in abandonment of the application.

Even where trademarks are not registered, rights may still arise through use. However, enforcing unregistered trademarks creates its own complications. In many cases, where marks have not been properly cleared, Franchisors may unknowingly use a trademark that is confusingly similar to another company’s registered or unregistered mark that has been in use for a longer period of time.

If a Franchisor has a registered or unregistered trademark as part of its franchise system and intends to grant such rights through the Franchise Disclosure Document (“FDD”), it is crucial that the trademark be searched and cleared prior to use, and that an application for registration be filed. Without proper review, particularly for unregistered trademarks, Franchisors face significant legal and financial risks, including:

  • Risk of Forced Rebranding: If trademarks are found to be unregistrable or unenforceable, Franchisors may be forced to rebrand their entire system, resulting in significant costs for both the Franchisor and its Franchisees.
  • Risk of Trademark Infringement: Failure to clear a trademark may result in infringement claims from third parties with prior rights. Such claims may need to be disclosed as a material change, creating additional legal and administrative burdens and potentially discouraging prospective Franchisees.
  • Risk of Rescission: Where a Franchisor fails to properly disclose trademark status or material changes within the required timeframe, Franchisees may have the right to rescind the franchise agreement. Rescission can be severe, requiring the Franchisor to refund fees, repurchase inventory, and compensate for losses, including lost wages.

It is no coincidence that trademark and franchise departments within law firms work closely together. These two areas of law are truly complementary—two peas in a pod. Conducting a thorough trademark review of a franchise system and understanding a Franchisor’s trademark portfolio prior to preparing the FDD is essential to building a strong, compliant franchise system with minimal legal risk.

This article was first published on 9 January 2026 on elitefranchisemagazine.com

 

 

 

The Corporate Minute Book

Sep 19, 2025 | Blog, FAQ

By Gregory M. Prekupec & Rutendo Muchinguri

Minute books often tell the full story of a Company from its incorporation date to the present day. This includes all records of meetings, identities of the shareholders, directors and officers, any government filings and information on who holds significant control of the Company.

Despite this importance, a lot of Company owners do not know what a minute book is, where it should be kept or the importance of ensuring that it remains up to date. Company owners only realise the importance of a current minute book when it is requested for due diligence purposes by an interested buyer or when they are rushing to close a transaction that involves the shares or assets of the Company. This places unnecessary pressure on the Company and its solicitor to quickly update and/or create a minute book prior to closing.

What is a Minute Book?

A Minute Book is a physical or digital/electronic collection of all the key legal, regulatory and administrative records of a Company. Section 140 of the Ontario Business Corporations Act (“OBCA”) provides that every Company in Ontario must maintain a minute book at the registered office of the Company or any other place designated by the Board of Directors.

Contents of a Minute Book

Minute books in Ontario must contain the following information (Section 140-141 of OBCA):

  • A copy of any unanimous shareholder agreement;
  • Articles of incorporation;
  • By laws of the Company and any amendments;
  • Minutes of meetings and resolutions of shareholders;
  • A register of all the directors including their full names and addresses;
  • Securities register;
  • New and cancelled share certificates;
  • Share transfer registers;
  • Shareholder loan registers;
  • Annual returns and filings;
  • Notices of change (Address, Directors and Officers);
  • Dividend payout register;
  • A register of all ownership interests in land identifying each property in detail and showing the date of acquisition of the property;
  • Register of individuals with significant control

When is it Crucial to have a Minute Book?

  • Business Transactions: As part of share or asset sales/purchase transactions or bringing in new investors, a minute book is often one of the first items that will be requested from a Company as part of due diligence. Not having a minute book may delay the transaction or lead to the potential investor losing interest in the deal.
  • Banking and Lending: Banks and lenders often request a copy of the minute book of a Company prior to approving any funding.
  • General Compliance and Accountability:  Any time there is a change in the status, share structure, officers/directors/shareholding of the Company, the minute book should be updated to reflect the change contemporaneously.
  • Regulatory Access: The OBCA provides for law enforcement, tax authorities or a regulatory body to be able to obtain access to some documents contained in a minute book, particularly the register of individuals with significant control.

Having and maintaining your Company’s minute book may initially seem like an added cost of doing business but it is a necessary one–the cost of not having an update minute book is often more than the cost of having one and can make a Company unattractive to potential investors or major lenders. It is also required by law to have and maintain a minute book. Our Corporate Team can provide their legal support to help you create and maintain your minute book to ensure the Company is compliant and ready to transact.

Don’t Get Carried Away: Demystifying Carried Interest in PE and VC

Aug 8, 2025 | Blog

By Gregory M. Prekupec & Rahul Gupta

In the world of private equity (PE) and venture capital (VC), few concepts spark as much curiosity—and confusion—as carried interest. Commonly referred to as “carry,” this structure sits at the heart of how fund managers get paid for their performance. But carried interest is more than just a compensation mechanism; it’s a powerful tool for aligning the interests of general partners (GPs) and investors, and one that raises interesting legal, structural, and tax considerations.

At its core, carried interest represents a share of a fund’s profits allocated to the GP—typically 20%—even though the GP may have contributed very little capital. This performance fee is designed to incentivize managers to maximize the fund’s return. But unlike a flat management fee, carried interest is only paid if the fund achieves profitable outcomes. In other words, it’s a bet that fund managers are willing to make on themselves.

Legal Structure

In Canada, private equity and venture capital funds are most commonly structured as limited partnerships (LPs). The investors come in as limited partners, while the general partner manages the fund’s day-to-day operations and investment strategy.

The LP Agreement governs the operations, capital contributions, and distributions of profits—including the carried interest. Importantly, the GP may be incentivized through carry to maximize profits for all, but the legal documents must be airtight in specifying how those profits are calculated, when distributions are made, and who ultimately gets paid. These provisions are especially important in determining how the infamous “waterfall” of payments will cascade down once an investment is exited.

Lawyers advising on fund formation must pay close attention to how carry is distributed, vested, and potentially clawed back.

The Mechanics

Carry is usually paid only after limited partners have recovered their invested capital and, often, a preferred return (known as a hurdle rate). After these benchmarks are met, excess profits are split—typically 80% to investors and 20% to the GP.

These allocations can vary. Some funds adopt a “whole-fund” carry model, where returns must be measured against the fund’s total performance, while others opt for a “deal-by-deal” structure, which rewards success on individual investments. Vesting schedules also vary, commonly spanning 3–6 years to ensure long-term alignment between fund managers and investors.

From a legal standpoint, carry provisions must balance flexibility and fairness—ensuring that carry rights aren’t abused but also rewarding the GP appropriately for generating returns.

Risk Management

Claw back provisions are a critical piece of carried interest mechanics. They protect investors in scenarios where early carry distributions to the GP prove excessive due to later losses. If fund performance drops, clawback clauses may require the GP to return a portion of prior profits. However, enforcing clawbacks—especially from GPs or team members who’ve left—can be difficult.

Escrow accounts are a common solution, holding a portion of carry until final fund liquidation. This gives the fund some security in reclaiming overpaid amounts. As legal counsel, I emphasize precise language in LP Agreements to reduce ambiguity in claw back enforcement.

It’s a delicate balance: we must incentivize high performance without letting early wins skew the long-term economic reality.

Tax and Emerging Trends

In Canada, carried interest is generally taxed as business income. Unlike capital gains, this means higher tax rates for the recipients. There’s also the “phantom income” issue, where GPs may owe taxes on carry allocations they haven’t yet received in cash. Many funds address this with periodic distributions to cover tax liabilities.

There’s growing discussion around whether carried interest should be taxed as capital gains to better reflect its investment-like nature. As lawyers, we must remain agile in advising on evolving tax interpretations and structuring compensation accordingly.

With more funds forming and more capital flowing into Canadian private markets, understanding carried interest isn’t just about economics—it’s about good governance, proper incentive alignment, and legal precision. As legal advisors, we stand at the intersection of strategy and structure, helping to design frameworks that drive both compliance and performance.

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