Trade Secret: How it can be protected?

Whenever I study IPR, I wonder what elements keep a trading business running for a long time. One of the most important factors is Trade secrets. Trade secrets are the lifeblood of various companies. With the increasing economy and competition in the market, the significance of trade secrets has also increased. Now the question arises: What can be considered a trade secret and how are they protected? We will also look into some famous cases and examples of Trade Secrets. Let’s find out more about it in the article below.

What is a Trade Secret?

Data or information about a business that is not commonly known to the public and that the owner desires to keep confidential is referred to as a trade secret. The trade secret owner must also gain financially from the secret to be considered a trade secret. Typically, such data or information gives its owner a competitive advantage in whatever way feasible.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement states that for any information to be classified as a trade secret, it must meet three requirements:

• The information must be kept secret, meaning that only those "inside the circle, which regularly deals with certain kinds of information" should have access.
• The information must be of commercial worth and
• Its owner must take reasonable precautions to keep it confidential.

History of Trade Secret

When Coke withdrew from the Indian market in response to the then-demand government that they turn over their secret formula, trade secrets were first incorporated into Indian law in 1977. Coke later returned once a new government took office ten years later.

Later, in 1991, India adopted a liberalisation programme that increased the importance of both domestic and foreign investment. India signed the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994 and joined the World Trade Organization (WTO).

However, notwithstanding the above-mentioned protest from India, "Trade Secret" was included in the TRIPS Agreement's final wording, and as a result, member states were required to preserve Trade Secret in accordance with Article 39 of the TRIPS Agreement. India then passed new laws to meet with the TRIPS Agreement's rules, but it did not pass any particular legislation pertaining to trade secrets since it believed that its current laws were adequate for complying with Article 39 of the agreement (Trade Secrets)

As a result of an increase in "Trade Secrecy" cases that were brought before Indian courts, India developed the National Innovation Bill, 2008, which included several other provisions as well as several that were specifically linked to Trade Secrecy. This can essentially be regarded as India's first attempt to introduce legislation specifically addressing trade secrets. Terms including "confidential information," "misappropriation," and "misappropriator" were defined in this bill. Additionally, it included particular clauses like Confidentiality Obligations, Confidentiality Arises from Non-Contractual Relationships, Remedies to Protect and Preserve Confidentiality, Orders to Prevent Threatened or Apprehended Misappropriation of Confidentiality, and many others. However, this bill vanished and was never introduced to the Parliament.

India remained silent on Trade Secret for roughly 8 years, and it wasn't until 2016 that Ambassador Michael Froman of the United States Trade Representative (USTR) and then-Indian Minister of Commerce and Industry Ms. Nirmala Sitharaman met for the tenth ministerial-level meeting of the India and United States Trade Policy Forum (TPF).

However, in the section addressing the future legislative agenda of the National Intellectual Property Policy, 2016, the phrase "Protection of Trade Secrets" was just briefly mentioned without any further explanation.

How are Trade Secrets protected?

Trade secrets, unlike patents, are protected without registration, i.e., they don't need to go through any formalities to be protected. A trade secret can be kept a secret for as long as it remains unknown or until it is legally obtained by another party and made public. These factors may make safeguarding trade secrets seem more appealing to some businesses. The information must meet a few requirements to be regarded as a trade secret. The cost and difficulty of complying with such requirements may be greater than originally thought.

Popular examples of Trade Secrets

1. There are several tangible and intangible instances of trade secrets. For instance, Google regularly updates its search algorithm, which is intellectual property, to protect and enhance its functionality.
2. A trade secret that is a formula or recipe and is kept private is the Coca-Cola formula, which is kept in a vault. It has never been made public because it hasn't been patented.
3. One example of a trade secret procedure is the New York Times bestsellers list. The list is more than just a compilation of sales figures (books with lower overall sales may reach the list, while books with higher sales may not). Yet, it considers book sales by aggregating chain and independent store sales and wholesaler statistics.

Trade secrets and corporate disclosure

Corporate disclosure is the information a corporation is compelled by law and morality to disclose. But the majority of the justifications for enhanced disclosure are moral ones.

According to De George, the following justifications constitute the core of the moral necessity for corporate disclosure:

- Every individual has a right to receive the information required to engage in a fair transaction.

- Every person has a right to object to other people's acts that will significantly impact them.

Laws on trade secrets

There is no specific enactment for trade secrets in India, but in various laws, there are certain provisions applicable to trade secrets.

Indian courts have upheld the protection of trade secrets under several statutes, including contract law, copyright law, equity principles, and - on occasion - the common law action of breach of confidence, notwithstanding the absence of a distinct trade secrets law in India (which in effect amounts to a breach of contractual obligation).

Section 72 of the Information Technology Act 2000- Although this protection only applies to electronic records under this section, it offers further protection. Trade secret owners have the following legal remedies available:

• the return of all confidential and proprietary information,
• an injunction forbidding a licensee, employee, vendor, or another person from disclosing a trade secret, and
• reimbursement for any losses incurred due to the revelation of trade secrets.

Section 408 of Indian Penal Code,1860- If any employee infringes or breaches the criminal trust of any corporation, he shall be liable to imprisonment up to 7 years or a fine.

Sections 51 and 55 of the Copyright Act - Trade secret cases have been brought before Indian courts and tribunals frequently. The Copyright Act was invoked to provide relief in several circumstances after copyright issues were brought up in court. Some sections in the Copyright Act can be quite helpful in addressing copyright infringement. The circumstances under which a copyright infringement occurs are covered in Section 51 of the Copyright Act. Section 55 of this Act deals with copyright civil remedies, while Section 63B deals with copyright offences as criminal offences.

Case laws

• American Express bank ltd. Vs. Ms Priya Puri (2006)- A trade secret is "a formula, technical know-how, or a particular mode or method of business established by an employer which is unknown to others," according to the Delhi High Court's definition in this case.
• Mr. anil Gupta &Anr. Vs Mr Kunal Dasgupta & Ors. (2002)- In this case, the Delhi High Court addressed the confidentiality of the information and 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 anyone 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, then the concept developed and evolved by the plaintiff is the result of the work done by the plaintiff
• Control Paint (India) Ltd. vs Sanjay Sribastab & Ors. (2006) - The Court held that to establish the use or intended use of sensitive information, it must be proved to the court's satisfaction that the defendant or former employees had access to the information as a result of their employment, which was not granted to anyone else.

Conclusion

The current trade secrets law in India was created by the judiciary and is based on the principles of equity and common law actions against breach of confidence, with jurisprudence generally focusing on an employee's obligations and duties towards the employer regarding confidential information acquired during the course of employment. There are several significant areas of Indian trade secret law that are ambiguous, including:

• the extent of damages if private information is compromised;
• trade secrets are stolen by rival companies; and
• procedural protections during court proceedings.

Furthermore, courts have decided to favour the owner of information as a literary work as defined by copyright law in the absence of a separate trade secrets law.

Since one of the goals of the National IP Rights Policy is to protect trade secrets, its recent development has given rise to optimism that such a law will be passed. Although no deadline has been set for achieving this goal, it is safe to assume that a trade secrets law will be passed soon.