Trade Secrets and their Protection under IPR Law

In a country, the legal system is made up of different laws that are in operation. Some legal systems are the result of international recognition and cooperation in a particular field of law, such as maritime law, space law, or humanitarian law. The IPR laws are an example of such a system.

Intellectual property rights (IPR) have gained significant attention and importance in recent times, both at a national and international level. As a result, new forms of IPR have been created and a more structured system has been established for their registration, regulation, and dispute resolution.

Intellectual Property (IP) is a type of property that includes intangible creations of human intellect. Different countries recognize various types of IP, with some of the major ones being trademarks, copyrights, patents, geographical indicators and trade secrets. The creators of IP are given certain rights related to their creation, which are collectively referred to as Intellectual Property Rights (IPR). The primary purpose of IPR laws is to encourage the creation of various intellectual goods by providing creators with economic incentives. These incentives allow creators to profit from their intellectual property for a limited period.

What are Trade Secrets?

A trade secret is confidential information related to a business that is not publicly known and the owner wants to keep it secret. It gives the owner an economic advantage over their competitors. Trade secrets can be any type of information that sets the owner apart from its competitors.

As per the TRIPS Agreement, any information that qualifies as a trade secret must meet three requirements.

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

Significance

Trade secrets have become increasingly significant as the industrial economy has become a major part of every state's economy. Unlike other forms of intellectual property, such as patents and copyrights, trade secrets do not have uncertainty attached to them. They can be easily created and controlled by explicit conduct or agreement between interested parties. This is especially useful for protecting information or ideas that do not fall within the conventional categories of intellectual property laws.

The significance of trade secrets has also increased due to the rapid advancement of technology. However, laws have failed to keep up with these advances. Trade secrets are a volatile form of intellectual property and lose their value as soon as secrecy is lost. Therefore, constant vigilance is required to ensure their secrecy.

Trade Secrets- International Scenario

• NAFTA (North American Free Trade Agreement)- Member countries are obligated to protect trade secrets from unauthorized acquisition, disclosure, or use.
• GATT/WTO/TRIPS- GATT, which later became WTO, was established to regulate trading activities among different countries. One of its provisions stated that undisclosed information must be protected, and no one should use it without the owner's consent. Misappropriation of such information is considered a liability. The TRIPS Agreement, which is provided by the WTO, requires member nations to take effective measures to prevent trade secret misappropriation. These measures include injunctive relief, damages, and provisional relief to prevent infringement and preserve evidence.

Countries such as the USA, Brazil, Japan, and China have enacted laws to safeguard against trade secret infringement.

Trade Secrets- Indian Scenario

In India, trade secrets are primarily protected under common law through the law of contracts and the principles of equity. While India does not have a specific statute exclusively dedicated to trade secrets, there are legal provisions and mechanisms that businesses can use to protect their confidential information:

1.         Contractual Protection:

•           Non-Disclosure Agreements (NDAs): NDAs are commonly used in India to protect trade secrets. These agreements outline the terms and conditions under which confidential information is disclosed and typically specify that the receiving party is prohibited from disclosing or using the information for unauthorized purposes.

•           Employee and Contractor Agreements: Confidentiality clauses in employment contracts and agreements with contractors can help in establishing obligations regarding the protection of trade secrets. These agreements often include post-employment confidentiality obligations.

2.         Common Law Protection:

•           Equitable Relief: The principles of equity, including the doctrine of breach of confidence, can be invoked to seek injunctions and other equitable relief in cases of trade secret misappropriation.

•           Tort of Breach of Confidence: The Indian legal system recognizes the tort of breach of confidence as a basis for protecting trade secrets. Courts may grant relief if it is demonstrated that there was an obligation of confidence, the information has the necessary quality of confidence, and there has been unauthorized use or disclosure.

3.         Criminal Remedies:

•           Section 408 of the Indian Penal Code: While not specific to trade secrets, Section 408 of the Indian Penal Code addresses criminal breach of trust by a public servant or banker. In certain cases, criminal charges may be brought against individuals who breach the trust associated with trade secrets.

4.         Protection through Agreements:

•           Agreements with Employees and Third Parties: Clearly outlining obligations and restrictions related to the use and disclosure of confidential information in contracts with employees, contractors, and other parties can be an effective means of protection.

5.         Practical Measures:

•           Security Measures: Implementing physical and digital security measures to restrict access to confidential information can be crucial in preventing unauthorized disclosure.

It's important for businesses operating in India to be proactive in protecting their trade secrets through a combination of legal agreements, internal policies, and security measures. While the legal framework for trade secret protection in India is evolving, businesses should regularly review and update their strategies to align with changes in the legal landscape. It is advisable to consult with legal professionals in India who specialize in intellectual property law for specific guidance tailored to individual circumstances.

CONCLUSION

In this article, we discussed trade secrets and their role in intellectual property rights. We also looked at the international and national aspects of trade secrets, and how they are dealt with in India. Finally, we explored ways to protect trade secrets from infringement.