TRADE SECRETS IN INDIA


Trade Secret is a kind of Intellectual Property which comprises of Confidential Information of an organization which is not known by the general public and for which the owner of such a company has taken reasonable steps to keep it as a secret and has commercial value.

Examples can include: Business procedures, methods, formulas, know how, plans, policies system, programs, client database, etc. Also, Coca Cola’s formula for the production of its aerated drinks and KFC’s recipe for its fried chicken are considered to be the best examples of the protection of trade secrets over the years.

It can encompass any information which can give the company a competitive advantage over and above others. The unwarranted disclosure of such information may injure the owner hence it needs to be protected as a trade secret.

It is extremely difficult for the companies across the country to protect their confidential information as there are several types of tools available over the internet and physically as well to transfer the information. The biggest challenge which exists is that the employees have an access to the crucial information of the organization which acts an internal threat. Hence, there persists both internal as well as external challenge for the protection of trade secrets.

Why Protect Trade Secrets?

The need to protect trade secrets is of vital importance for any organization as it includes all the information that effectively makes the company of one a kind in the industry. Trade Secret is a kind of fragile intellectual property that needs to be given protection under the law of confidentiality incase a contract is entered into between two or more companies. For example, companies usually make the other party sign a Non Disclosure agreement so that all the crucial information remains protected throughout the term or there might be separate clause in the contract for the same.

The need for a Confidentiality agreement arises for the following factors:

  • It will aid in establishing a basic contractual commitment. Hence, it will protect an assertion under the common law as it will form a relationship of faith.
  • It will put a limit on the information that needs to be revealed.
  • This will also have a moral effect on the party who has signed the agreement as he/she will always be informed about the conduct that is expected from him or her. Hence, proper methods and procedures will be put in place to keep a check on the disclosure of the information which is being communicated.
  • Also, the inventor has an option to keep his invention as a trade secret, i.e., he has the option of keeping his confidential information as a secret for some period of time prior to making his invention public and to seek for the grant of a Patent.

Position in India

India does not have a distinct statute for the governance and protection of Trade Secrets. The Indian Judiciary has upheld the Trade Secret protection under the principles of Equity and sometimes under the Common Law of Action for the violation of any of the Contractual Obligations. The remedies which are available in the case of Breach of Confidence are Injunction that is to prevent the infringer from further making unauthorized use of the information and disclosure of the trade secret to any other third party, restoring the company with all of its proprietary and crucial information and damages or compensation for the losses that have been borne by the company for the unwarranted revelation of the trade secret.

  • Richard Brady v. Chemical Process Equipment Private Limited (AIR 1987 Del. 372)

FACTS

In this case, Plaintiff had invented a Fodder Production unit and for the local production of the same, the Defendant was asked to supply the thermal panels. For the same, the Plaintiff had shared the technical material, technical know- how, drawings and specifications with the Defendant. However, no confidentiality agreement was signed in between the parties.

An agreement was entered into for the supply of Thermal Panels between the Plaintiff and the Defendant. After some period of time the Plaintiff learnt that the Defendant will not be able to supply the thermal panels and did not go ahead with the placing of the orders.

ISSUE

The Plaintiff after acquiring knowledge of the Defendant’s own fodder production unit filed a suit against for the misappropriation of the Plaintiff’s information that was exchanged with the Defendant

JUDGMENT

The Court awarded an injunction against the Defendant even when there was no confidentiality agreement signed in between the parties and further widened its equitable jurisdiction.

  • Ritika Private Limited v. Biba Apparels Private Limited (DEL HC DE 0784 2016)

FACTS AND ISSUE

In this case, the Plaintiff had sought injunction against the Defendant as he alleged that the Defendant had imitated his clothing designs.

JUDGMENT

However, the Court was of the view that if an injunction has been prayed for in the pleadings for the infringement of the trade secrets then the Plaintiff must specify what is his trade secret and how does he hold the ownership of it, only then the will the Court contemplate the passing of the injunction against the Defendant. Incase, the Plaintiff is unable to prove the above mentioned then the Court cannot pass an order of injunction against the Defendant. Additionally, no relief would be provided under the Copyright Act, 1957 when the design, sketch or drawing has been used for the creation of 50 or more apparels.

Hence, the aggrieved not only has to prove that his confidential information has been breached upon but also, the quality of the information and its nature needs to be proved in the Court of Law in order to get remedied.

CONCLUSION

India is a member and signatory of the Paris Convention and the provisions of the Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS) clearly stipulate about the protection of Confidential Information or Trade Secrets under Article 1(2).

Also, under article 39 of the TRIPS there is a provision of guard against Unfair Competition which is additionally mentioned under article 10 bis of the Paris Convention for the information that is:

  • Secret and unknown and is not accessible by the general public
  • Has Commercial Value,
  • For which the owner of the information has taken reasonable steps to keep it as a trade secret.

On May 12, 2016 the Government announced and came up with the National IP  Rights Policy which encompasses seven aims and objectives in its sphere. One of the aims of the policy is to ensure Legal and Legislative Guard in the form of a Statute for the protection of Trade Secrets or Confidential Information.

Currently, India completely relies upon the Indian Judiciary for the protection and provision of remedies against the breach of Confidence, Contractual Obligations and Unauthorized use of Confidential Information. However, with the forming of the National IP Rights Policy, one can be certain for the making of the statute pertaining to Trade secret protection in India in the near future.

This article has been authored by Gurpreet Kaur Arora from Team LawSkills.

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