Trade Secrets and IPR

Trade Secrets can be defined as any information which is not known to the general public but confers some economic benefit to its holder. India currently doesn’t have any legislation to protect trade secrets but, they have been protected by the courts in a number of cases. Probably the best example of a trade secret is Coca-Cola’s secret formula that they have kept in the dark for a century now and they have every right to do so. The formula which is called WD-40 was initially patented but after a certain change in its formulation the company decided that they don’t want to file for a patent again as it would require them to disclose the information to the public, although patent rights would be conferred upon them, it would still be a risky business. (adsbygoogle = window.adsbygoogle || []).push({});

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Trade secrets fit the narrow sphere of technical know-how which the company wants to keep confidential but at the same time have complete monopoly over it. Trade secrets do not require any registration, they are protected once reasonable steps are taken by the IP holder to maintain it a secret. Any information once disclosed to the public cannot constitute as a trade secret. (adsbygoogle = window.adsbygoogle || []).push({});

Trade Secrets in India

India does not have any legislation dealing with trade secrets, so they automatically become a part of the common law rights of the individual. This has been upheld by the courts in a number of cases. In the case of Indian Farmers Fertilizer v. Commissioner of Central Excise (2007) 7 VST 6 CESTAT New Delhi, the definition and protection of trade secrets was upheld and the common law rights were granted. In the case of American Express Bank Ltd. vs Ms. Priya Puri(2006) IIILJ 540 Del,the Delhi High court held that “a trade secret can even be peculiar mode or method of business adopted by an employer which is unknown to others (adsbygoogle = window.adsbygoogle || []).push({});

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The criteria for a product to qualify as a trade secret was laid down in the case ofBombay Dyeing and manufacturing co Ltd v Mehar Karan Singh (2010 (112) BOMLR 375), wherein it was held that the extent to which the information is known outside the business; the extent to which it is known to those inside the business, namely employees; the precautions taken by the holder of the trade secret to guard the secrecy;  the savings affected and the value to the holder in having the information as against competitors; the amount of effort or money expended in obtaining and developing the information; and the amount of time and expense it would take others to acquire and duplicate the information, all play an important role in determining the validity of a trade secret. Precisely, if any information holding any economic value is kept protected by its owner, would constitute as a trade secret. (adsbygoogle = window.adsbygoogle || []).push({});

India is also a signatory to the TRIPS agreement, Article 39 of the same elucidates the following statement: In the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention (1967), Members shall protect undisclosed information that is commercially valuable to the company it also encircles the data which is submitted to governments or governmental agency.

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Being a signatory, India has expressed the intention to comply with the treaty, however this intention is not binding and only holds persuasive value in the courts.

Although India does not have any specific legislation for trade secrets in 2008, the Ministry of Science and Technology published draft legislation titled the National Innovation Act, 2008 which embarked on principles to consolidate the law for confidential information. This was however not passed and the courts continued to grant trade secret protection on the basis of equity, common law rights and contractual obligations. (adsbygoogle = window.adsbygoogle || []).push({});

Trade Secret In US

Unlike India, the United States has laws which recognize trade secret protection in the country. The laws on trade secret vary from state to state but the Uniform Trade Secrets Act of 1979 [hereinafteras “UTSA”]aims at bringing some form of uniformity among the states. It provides for the definition of trade secrets as well as remedies for its misuse. It also states the advantages of trade secrets and provides that any protected information, when disclosed would lead to an end of trade secret protection as it would come under public domain. However, inRockwell Graphic System, Inc v DEV Industries, Incit was held that disclosure of a trade secret to a limited number of outsiders for a particular purposedoes not extinguish trade secret protection. (adsbygoogle = window.adsbygoogle || []).push({});

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In broad sense, the US regime of trade secrets does not delineate from the judicial pronouncements in India, for example, the 6 factors laid down in the UTSA are similar to that of the criteria laid by the Bombay High Court in the in the Bombay Dying case. In 2016, the congress gave assent to a federal law on trade secrets named “Defend Trade Secrets Act of 2016” which created a federal civil cause of action to the parties whose trade secret has been misused. This led to a huge influx in trade secret related cases, in 2016 alone 860 trade secret related cases were filed, followed by 1137 in 2017.

Trade Secret and Competition Law

Competition Law is a relatively new field as compared to the rest of the fields of law and is growing in terms of popularity and importance every day. IPR laws have always been contrary to competition laws. IPR gives the owner complete control and monopoly over the IP while competition law deals with battling monopoly in the markets.  The Competition Act, 2002 in Section 3(5) provides certain protection to the intellectual property of an individual, but it doesn’t talk about trade secrets. (adsbygoogle = window.adsbygoogle || []).push({});

Trade secrets confer certain economic edge over competitors in the market, while the sole aim of the Competition Act is to provide a fair competition in the market, as provided in the preamble of the act. So, in a case where a company doesn’t want to disclose their IP to the public but is in turn harming fair competition, which law would prevail? Common law rights are limited to the extent where the statutes are silent, so in most cases, if not all, provisions of competition law would override trade secrets. Companies, in this case, would be left with 2 options, firstly, to file for a patent and claim patent protection for their IP or disclose their know-how for common good. This would, in fact, defeat the purpose of IP protection as industry leaders would be deprived of incentives to develop more inventions and would in-turn harm the scientific development of the nation.

The need for a proper legislation for trade secrets is highlighted here, to what extent trade secrets so as they don’t harm development within the nation?  While patent and copyright holders are not subject to such a dilemma, the owners of such confidential information face certain challenges if they are to continue protecting their know-how. (adsbygoogle = window.adsbygoogle || []).push({});

Way Forward

In today’s world every company has some sort of a trade secret with them which allows them to sustain in the market, Coca-Cola has its formula, McDonalds has its secret sauce, even google has its hyperlink algorithm. Now, if these were to be disclosed to the public, even by a way of a patent, it would seriously lead to the company’s downfall, without these trade secrets, these companies, as we know them today, wouldn’t exist.

It goes without saying that India needs a trade secret legislation and a competent authority to govern the same. The 2008 bill was a step in the right direction, India has mostly drawn itstrade secret and Anti-trust governance from EU and US jurisdictions, both of which having a proper law dealing with trade secrets and confidential information. Deciding trade secret cases on a case-to-case bases wouldn’t be feasible. Such a tribunal would also he helpful in handling cases relating to abuse of IPR.

Author: Varun Singh is B.A.LL.B(Hons.) student at Dr. B.R Ambedkar National Law University, Sonepat.


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