Concept Of Trade Secrets In IPR Regime

Author – Bharat Shrama, Apurvi Tiwari

INTRODUCTION

Due to advancement in technology and shareability of content, the concern to protect the unique process, idea, or information from unnecessary and unauthorized access has seen a lot of growth. In other words, recent development in technology, has led to content become vulnerable to copying, storing, or sharing.

This poses a great concern and challenge to businessmen to protect confidential business information. Business strategies, proposals, databases of employees, designs, programs, devices, formulas, composition, etc. comes under business information. All these things do not qualify the criteria for copyrights or patents.

In fact, some regular activities of a company may not need formal protection but still, remain vulnerable among its workforce. It is sometimes observed that employees steal crucial information and set up a competing business while others are about to leave the job, infringe on designs, recipes, or any other unique combination.

However, India does not have any specific law for trade secrets. Indian courts take up the cases for trade secrets under contract law, copyright law, principles of equity, or at times common law action of breach of confidence.

In addition to this, Section 72 of the Information Technology Act 2002 also protects the trade secrets of a company, but this protection is only limited to electronic records.

Nowadays, trade secret law in India is judiciary made law. It has no legislative enforcement in the country.

WHAT IS A TRADE SECRET?

Trade Secrets are IP Rights on confidential information that may be sold or licensed. Trade Secrets are an important Intellectual Property that helps small businesses to protect their secret formulae, information and other key matters that give them a competitive edge.

Any information that can be considered as a trade secret gives the company a competitive advantage over its competitors. The procedure involved in identification and protection of trade secrets may differ from areas and jurisdictions, but three things remain common : away from the public, offering some economic benefit and it is being actively protected.

Trade secrets may have a different form. For instance patterns, design, formula, recipe, method, instrument, or any other activity that is not visible to others or that may be used as a means of giving a competitive advantage and providing value to customers may also constitute trade secrets.

At times trade secrets are the highly confidential “documents” of the business world and may need to be guarded by government agencies. It is because the process of making a product is much more expensive or unique than competitive intelligence. To successfully protect its trade secrets, companies require employees to sign non-compete and non-disclosure (NDA) during recruitment.

However, it is to be noted that if a trade secret owner is unable to safeguard the secret or if anyhow the secret is discovered, released, or becomes general information among the public, the protection of the trade secret will be terminated.

WHAT IS REGARDED AS CONFIDENTIAL INFORMATION/TRADE SECRETS?

More complications in the protection of trade secrets or confidential information arise when there is no underlying contractual agreement or when there is theft of information by a third party. Theft of trade secrets on the instigation or by third parties is an important area where jurisprudence is growing in India. The Indian jurisprudence indicates that protection for trade secrets is provided not only when there is an underlying contract but also in the absence of any contracts on the ground of equity and breach of confidence.

As long as the information is confidential it did not matter whether there was a formal contract protecting it from disclosure and misappropriation. Even without an underlying contract, theft of trade secrets has been viewed seriously by the courts.

Accepting that urgent need to protect the plaintiff’s rights, the courts have held that disclosure of confidential information after leaving the employment by an employee can be restrained.

In the area of theft of trade secrets by third parties, the Indian courts have had to deal with cases where theft has been either actively orchestrated by third parties or where third parties have been passive beneficiaries.

Ensuring non-disclosure of trade secrets in court proceedings is an essential concern of the courts in India as is apparent from the opinion of the apex court in multiple instances.

Courts have outrightly refused disclosure of information because the information would then become public and not remain confidential. The OECD report also echoes this, in the case of India, recognizing that secrecy of confidential information can be sought by the plaintiffs at the time of litigation. Trade Secret protection as defined under TRIPS agreement under Article 39.2 aims at securing confidential business and technical information from being stolen through either a breach of confidence or contract or through the intervention of third parties.

Further, with patentability standards varying across countries, patent rights have become increasingly uncertain. In such circumstances, if the trade secret law is reinforced across the globe, it will provide a feasible opportunity to inventors to keep their creations confidential.

Further, a stronger trade secret law will ensure enhanced that will aid a holder of a patent by enabling him to protect his patented technology better, and even beyond the patent period.

PROTECTION OF TRADE SECRETS

In the absence of legislation in India, the only protection that a trade secret gets is through judicial rulings and the provision of other laws. The judicial pronouncements always give their best to protect the trade secret and provide remedies against the infringement.

Indian courts recognize three circumstances in which proceedings may arise. These are: –

  1. If an employee joins a company and gets aware of the trade secret, and then discloses the information accidentally or deliberately to any illegal person.
  2. If a person is compelled to join a company and to extract the crucial information for the benefit of an unauthorized person.
  3. If a licensee fails to protect the trade secret of a company in a highly competitive business environment.

FAMOUS CASE LAWS DEALING WITH TRADE SECRETS

  • John Richard Brady Ors v. Chemical Process Equipment P Ltd and Anr:

This case deals with the unauthorized use of trade secrets. It was observed that it would be in the interest of justice to prevent the defendant from abusing the crucial information including the technical details of the plaintiff’s fodder production unit given to them on the condition of strict confidentiality.

  • Daljeet Titus, Advocate v. M Alfred A Adebare and Ors:

The court held that the agreement must restrain a breach of confidence, independent of another side. During the injunction, it was directed to the defendants that they would not be entitled to use the material of the plaintiff to which they had accessed in breach of confidentiality.

The plaintiff and defendant worked together but did not take to any material that came into their knowledge through confidential relationships.

Regarding trade secrets of banking, the Delhi High Court in relation to secrecy maintained by banks towards their customers noted that banks have a duty of confidentiality towards their customers. If someone steals such information, the banks themselves shall be held liable for hampering such secrecy.

CONCLUSION

In the absence of a strong trade secret law, it fits into the existing laws of tort, contracts, and competition. However, a separate or specific law on trade secrets may eliminate this disparity.

As per the Agreement of TRIPS, every member is to change their noncompliance with the guidelines of the Agreement. Thus, India needs a law that not only protects the trade secret and its confidentiality thereof, but also makes suitable amendments in the real-time framework of the Competition Act for misappropriation and illegal use of confidential information.

The criminal law of the country that is the Indian Penal Act, needs to be amended criminal liability for the breach of confidence and disclosure of trade secrets needs to be imposed. Strict rules need to be framed to deter the wrongdoer.

Companies need to establish strong psychological bonds among the employees. To make the non-compete and non-disclosure agreements more effective.

After taking the above points into consideration we can conclude that trade secret protection in India is not in the best form yet. It is time to take the initiative and establish the required law as, being a developing nation, it needs legislation to protect the business environment as to transform the country into a hub of opportunities for companies.

In short, businessmen’s fear of unauthorized access, misappropriation of crucial information, and disclosure of trade secrets to their data needs to be allayed.

About the author

Bharat Sharma

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