TRADE SECRETS IN IPR

Introduction 

A trade secret has not been defined anywhere in the statutes. However, a trade secret as the name is suggesting, is any kind of information that is secret or not generally known in the relevant industry, giving the owner an upper hand over its competitors in the market. Generally, any information used in the operation of a business or other enterprise or is valuable in nature, or can provide potential economic positives over others comes under the purview of a trade secret. 

The precise terminology by which a trade secret stands has been laid on three important factors: a trade secret is some sort of information not known to some relevant portion of the public, (b) a trade secret is information that confers some sort of economic benefit to its real holder and (c) a trade secret is the outcome of reasonable efforts to maintain secrecy. Also, a trade secret can be in the form of a combination of elements, where each of which itself is available in the public domain, but where a trade secret is in the form of a combination as a secret, it provides a competitive advantage. 

International Instruments

The TRIPS Agreement under Article 39 protects trade secrets in the form of “undisclosed information”. Article 39 provides a stable mechanism for the protection of trade secrets at the international level. However, the condition is that the information must be secret and should not be generally known or readily accessible to the person where the information comes under the normal strata kind of information. 

Article 39 guarantees effective protection against unfair competition and its practices (as provided under Article 10 of the Paris Convention 1967), and states members shall protect the undisclosed information in accordance with the data submitted to governments or governmental agencies. Further, it provides that natural and legal persons shall protect the information lawfully within the course of their control from being disclosed to, acquired, or used by others without the real holder’s consent in a manner to encourage honest commercial practices. 

Statutory provisions related to Trade Secrets in India

1. Section 27 of the Indian Contract Act, 1872 states that an agreement to be considered valid must be reasonable between the parties and consistent with the interest of the public. 

2. Section 72 of the Information Technology Act, 2000 states that if any person in pursuance of his powers conferred under the Act secures access to electronic records, information, documents etc. without consent of the person concerned and discloses such information will be punished for a term extending to two years or with a fine of 1 lakh rupees or with both. 

3. Section 65A of the Copyright (Amendment) Act, 2012 states that any person who avoids an effective technological methodology applied for the purpose of protecting the rights conferred, with the intention to cause an infringement of such rights, will be punishable, extending to 2 years along with a fine. 

Cases 

In the case of American Express Bank Ltd. v. Ms. Priya Puri, Delhi High Court held that a trade secret is some protected and confidential information that an employee acquires during his course of employment and the information which should not be transferred to anyone. However, routine day-to-day affairs of an employer which have knowledge of many and is commonly known to others cannot be termed as trade secrets. Thus, the name of the customers is neither trade secrets nor property. 

In the case of John Richard Brady and Ors. v. Chemical Process Equipment P Ltd. and Anr, The Delhi Court in a case where unauthorized use of trade secrets took place, held that plaintiffs can always put a case against the defendant in case of infringement of copyright or of strict confidentiality where the specifications, drawings, and other technical information about the fodder production unit were supplied to the Defendants. 

In the case of Bombay Dyeing and Manufacturing Co. Ltd v. Mehar Karan Singh, the plaintiff’s system was the only one in the industry, but later the same system was developed by his competitor. The information let out was held to be trade secret which further included elements that were otherwise in the public domain. Thus, trade secrets could consist of a combination of elements, characteristics belonging to the public domain. 

Further, the court laid down the following factors to consider a trade secret: 

1. The extent to which the information is known outside the business

2. The extent to which the information is known inside the business (employees)

3. Precautions are taken by the holder to guard the secrecy of the information

4. Savings effected and value of the holder in having information as against competitors

5. Amount of effort in developing such information

6. Amount of time and expense would take to duplicate the work.

Advantages of Trade Secrets

Trade Secrets have recently become a popular form of intellectual property protection for several reasons. It includes the ubiquity of trade secrets and the broad aspects of eligible subject matter. One of the biggest positives of trade secrets is that it gave rise to flexibility and scope of protection in it. Trade secret offers a wide range of subject matters which also don’t fall under traditional intellectual property schemes. For instance, patent law is restricted in comparison with trade secrets as patents are subjected to limited composition, production process, plant species etc. 

Another positive of Trade Secret is that it has low-risk elements in many aspects. During the application for registration for a patent, copyright, trademark, one has to disclose the secret. That carries a risky element as if the application got denied, and then the secret does not remain a secret. 

Conclusion

Depending on different legal systems, the degree of legal protection granted to trade secrets can be different, but it is the common foundation in all trade secret protection to avoid any sort of unfair competition. However, Trade secret violation depends upon case to case, person to person, but in general, it is essential to restrict any unfair practices. Unfair practices in respect of trade secrets can include industrial or commercial espionage, breach of contract, or breach of confidence. 

References:

• https://www.wto.org/english/docs_e/legal_e/27-trips_04d_e.htm

BY: 

Munis Nasir, 3rd Year, Jamia Hamdard