Trade Secrets and their Protection under IPR Law By: Dhruv Gupta

August 17,2019:

The author, Dhruv Gupta, is a 2nd Year, BA.LLB (H) student of University School of Law and Legal Studies, GGSIPU. He is currently interning with LatestLaws.com.

Introduction

A legal regime existing in a country is the result of the various laws in operation in such country. However, there are certain legal regimes, which have been the result of international recognition and cooperation in that field of law. This may include regimes varying from maritime law to space law to humanitarian law. One such regime is that of the IPR laws.

In the recent past, Intellectual Property Rights (IPR) and their protection have taken a centre stage, both at the national and the international level. This has resulted in creation of varying IPR while also ensuring a systematised registration, regulation and dispute resolution with regard to such IPR.

Intellectual Property is a category of property that includes intangible creations of the human intellect. A large variety of such intellectual properties exist, and their recognition differs from country to country. However, some major IP are trademark, copyright, patent, geographical indicators and trade secrets. A person who creates or evolves any of these IP are given certain rights related to such IP, which has been termed as IPR. The main reason behind the introduction of IPR and laws for protecting them, is to encourage the creation of a range of different intellectual goods. The IPR law provides such people with rights to such properties (although for a limited period), which act as economic incentive for such people, owing to the fact that they can profit from the intellectual property they create.

What are Trade Secrets?

A trade secret refers to data or information, relating to a business, which is not generally known to the public, and which the owner wishes to keep as secret. Another essential feature of a trade secret is that the owner derives an economic benefit from such secret. It is usually such data or information, which gives its owner, an edge over its competitors, in whatever manner possible.

According to the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, for any information to be termed as trade secret, it has to satisfy three essentials-

1. The information has to be secret i.e, it should not be known in general or easily accessible to the people ‘within the circle, which normally deals with these kinds of information’,
2. The information must have a commercial value, and
3. The information must be subject to reasonable steps, by its owner, to keep it secret

The Uniform Trade Secrets Act, which was implemented in the USA, defines trade secret as “Information, including a formula, pattern, compilation, program device, method, technique or process, that-

1. Derives independent economic value, actual or potential, from not being generally known to, or not readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy”

Significance

As the industrial economy has become a major part of every State’s economy, the significance of trade secrets has also increased. This is due to the fact that unlike other IPR like patent, copyright etc. (which have uncertainty attached to them), trade secrets do not have such uncertainty. Another reason for their increased significance is the fact that the advancement in the field of technology, have taken a swift pace, while the laws have failed to catch up to them. One of the major reason for their increased importance can be attributed to the fact that their creation and control is rather simple. Unlike the tedious processes involved in copyright, patents etc., trade secret rights can be created by explicit conduct or agreement between interested parties.

Such rights starts as soon as the idea takes a concrete form and exists as long as secrecy is maintained. This also helps as information or ideas which do not fall within the conventional categories of IPR laws prevalent in the country, can be protected under trade secrets.

But like any other thing, trade secrets also have certain negative aspects attached to it. They are a volatile form of intellectual property and seize as soon as secrecy is lost. This also leads to them requiring constant vigilance over such information, so as to ensure its secrecy.

Trade Secrets- International Scenario

NAFTA (North American Free Tarde Agreement)- Under the said Agreement, member countries are bound to protect trade secrets from unauthorised acquisition, disclosure or use.

GATT/WTO/TRIPS- GATT (& later WTO) focused on regulation of trading between the various countries. It provided that undisclosed information needs to be protected against use by others, without the consent of the owner, even providing liability for such misappropriation. The TRIPS Agreement, provided by the WTO, requires member nations to provide effective remedies against trade secret misappropriation, including injunctive relief, damages and provisional relief to prevent infringement and to preserve evidence.

Countries like USA, Brazil, Japan, China etc. have created specific, dedicated provisions and laws to protect against trade secret infringement in their domestic jurisdictions.

Trade Secrets- Indian Scenario

The Indian position, with regard to trade secrets is a little different. It is a relatively neglected field, whereby there is no enactment or policy framework dedicated specifically to protection of trade secrets. However, the judiciary has upheld protection of such trade secrets, although via the course of some other legal frameworks. Some of these frameworks include-

1. The Copyright Act, 1957 [Sec. 51, 55 & 63]
2. The Designs Act, 2000
3. The Information Technology Act, 2000 [Sec. 65 & 72]
4. The Indian Penal Code, 1850 [Sec. 408 & 415]
5. The Indian Contract Act, 1872 [Sec. 27]
6. The Competition Act, 2002 [Sec. 3]

Some of the most important judicial pronouncements, with regard to trade secrets are-

• American Express Bank Ltd. vs Ms. Priya Puri [(2006) IIILLJ 540 Del]

In this case, the Delhi High Court defined a trade secret as “a formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others.”

• Mr. Anil Gupta & Anr. vs Mr. Kunal Dasgupta & Ors. [97 (2002) DLT 257]

In this case, the Delhi High Court, while dealing with confidentiality of information stated that “The concept developed and evolved by the plaintiff is the result of the work done by the plaintiff upon the material which may be available for the use of anybody but what makes it confidential is the fact that the plaintiff has used his brain and thus produces a result in the shape of a concept and if the defendant is allowed to show their own reality show based on the concept originally conceived by the plaintiff, it will be allowing the defendant to use that concept and reap the fruit of the labour of the plaintiff.”

• Pramod s/o Laxmikant Sisamkar & Uday Narayanarao Kirpekar vs Garware Plastics & Polyester Ltd. & Anr. [(1986) 3 BomCR 411]

In this case, the respondents contended that the petitioners had committed criminal breach of trust and cheating, by applying the same technical know-how as they had acquired while their training under the respondent. Although the court did not answer whether trade secret can be termed as property, as the case failed to establish the other necessary requirements for attracting criminal liability. However, the court did state that “It is only when technical know-how is used by them in contravention of the aforesaid provisions of the Agreement of Service, that it can be said that any offence alleged against them under section 408 and 420, IPC is prima facie committed by them.”

• Burlington Home Shopping Pvt. Ltd. vs Rajnish Chibber [61 (1995) DLT 6]; Mr. Diljeet Titus vs Mr. Alfred A. Adebare & Ors. [(2006) 32 PTC 609]

In both of the above mentioned cases, the question was whether a database of compilation of customers and their mailing address could be subject matter of a copyright? The court answered the same in the affirmative stating that “a database consisting of compilation of mailing addressed of customers can be a subject of copyright and if used by the defendant, will amount to infringement.”

• Control Paint (India) Ltd. vs Sanjay Sribastab & Ors. [(2006) 2 Cal LT 145]

The Court held that in order to prove that confidential information will be or is being used, it has to be proved to the satisfaction of the court that the ex-employees or the defendant, by virtue of their employment, had access to the secret information, which was not available to any outsider.

• Shree Gopal Paper Mills Ltd. vs Surendra K. Ganeshdas Malhotra [AIR 1962 Cal 61]

In this case, the plaintiff sought to refrain the defendant from giving his services or advice to others during the continuance of the agreement of employment. The court did not grant injunction and dismissed the appeal stating-

• The master is entitled to protection with regard to trade secrets, secret process of manufacture and invasion of his customers.
• Restraints imposed by the agreement are not reasonable in the interest of the defendant and are against public policy.
• Master is not entitled to protection against competition.
• In the present case, the protection sought is neither against trade secrets nor trade connection.

All the above mentioned show that the Indian Courts have common law principles like equity, fraud etc. to grant protection to trade secrets. In particular instances, it has even used provision of varied laws like the Contract Act, Copyright Act, IPC etc. to grant relief against illegal use of trade secrets. But at the same time, there is no uniformity present with regard to the process of protection of trade secrets as the courts have given varied decisions, based upon the varied circumstances of each case.

Another major tool that has been used to protect trade secrets has been through the creation of agreement. The major agreement under it is the Employee Confidentiality and Non-Competing Agreement. These agreement define what confidential/ secret information means, when it can be disclosed and what remedies can be availed in case of infringement of such protection. Such agreement provide both protection and relief.

As a result of the importance of trade secrets, there have been attempts to bring about legislation for their protection. One such attempt was the Personal Data Protection Bill, which was introduced in the 2006, but has not till date been passed. Subsequently, after the Supreme Court Judgement in Justice K.S. Puttaswamy vs Union of India (Privacy judgement), wherein privacy was held to be a fundamental right, need for such a law has further increased.