TRADE SECRET

All of us are familiar with Coca-Cola but the process to make it or its ingredients, are a Trade Secret. A similar amount of secrecy is maintained for ingredients of K.F.C. Any information which provides that company or business or enterprise with a competitive edge over the other is considered to be trade secret. Trade secret encompasses manufacturing or industrial and manufacturing secrets.[1] Trade secrets are generally considered as a formula, pattern, compilation, program, method, technique, or list of actual or potential customers or suppliers, which is not known to the general public and can be used to gain a competitive economic advantage over other businesses.

The three most important characteristics of trade secret are that they are not public information, their secrecy provide an economic benefit to the holder and their secrecy is actively protected.  There are mainly two reasons for the Trade secret to increase viz other forms of intellectual property like Patent, Trademark and Copyright have an element of uncertainty as compared to Trade Secret and secondly, the technology is changing so rapidly that it has surpassed the existing laws intended to encourage and protect inventions and innovations. Another significant factor which has enhanced the value of trade secrets is the relative ease of creating and controlling trade secret rights[2].

Protection of information such as ideas or information which does not qualify to be protected as intellectual property within the legal framework Intellectual Property Laws of the land can be protected by Trade Secrets[3]. An inventor or company can choose to disclose an invention so that the world can benefit from it and the knowledge that went into its creation, and in return receive a patent. A patent right grants the holder the ability to exclude others from using the patent without permission for a period of 20 years from date of filing. Alternatively, the same invention can be kept secret. In this case the knowledge is not shared and the idea is protected as long as it is kept secret – potentially forever. However, if another party separately discovers the same invention, the initial inventor has no recourse.

POSITION IN INDIA

Being a signatory of the TRIPs Agreement, India is under an obligation to bring its intellectual property laws in conformity with international standards. However, unlike the US and other developed countries India has no legislation dealing with trade secrets. In India, the protection is of trade secrets is Common Law based. Under section 27 of the Indian Contract Act provides some sort of limited remedy where it bars any person from disclosing any information which he acquires as a result of a contract[4].

PROTECTION

Article 39.2 of the T.R.I.P.S (Trade-Related Aspects of Intellectual Property Rights) agreement protects trade secrets in the form of undisclosed information. In the absence of a uniform legislation in India, there are mainly two types of protection granted to Trade Secrets viz Contractual and Equitable. As trade secrets are very important for the business, sometimes, they are shared with certain employees and with people outside the organization such as suppliers, franchisees. Employers have to rely on the “confidentiality clauses” in their contracts with the outsiders. Through this clause, parties are restricted from divulging the information to outsiders[5]. As far as the employees are concerned, after their employment period gets over, they are not allowed to disclose the information or use it for their own benefit. There should however be creativity to distinguish the information from the other information available and known in a particular field. The extent of protection available varies from one jurisdiction to the other. Most jurisdictions provide protection to business information like strategic plans, cost and pricing information under the Trade Secret law like China protects operational information and Korea protects managerial information.

In M/s Gujarat Bottling Co. Ltd (GBC) and others Vs Coca Cola and Ors., there was a franchise agreement between Coca Cola which allowed the Gujarat Bottling Company (G.B.C) to manufacture, bottle, sell and distribute the beverage, while also restricting its right of dealing with the competitors. The Court held that the restriction, in this case, was for distribution of the goods of the franchiser and that it cannot be considered as restraint of the trade[6].

In case there is no contractual obligation, then the court rely on common law action of breach of confidence just like in the case of Escorts Construction Equipment Ltd Vs Action Construction Equipment P. Ltd. In that case, the Defendant, who was an ex-employee of the Plaintiff had tried to misappropriate the designs of his ex-employer. The defendant left that company to start up his own entity which manufactured the goods as similar to that of his previous company. The criminal remedies available to the owners of Trade secret are under section 405-409 of the I.P.C (relating to criminal breach of trust) and section 417-418(relating to cheating). Injunction is the most common form of remedy in civil matters. The following tips are for businesses to protect their trade secrets like Identify what needs protection, Label documents that Contain protected information, Secure computers, Maintain secrecy with outside vendors and Limit public access to the company.

ADVANTAGE OF TRADE SECRET

The owner of a trade secret can protect the secret from any party that steals it or uses it in a manner that violates a non-disclosure agreement. The patent holder has much greater flexibility to enforce its rights and protect the exclusivity of the technology. Even if a thing has not been patented, in case someone steals it and uses it then the owner can claim theft of trade secret and get redressed by way of court action.

Trade secret is a legal tool used for protecting intellectual property from being misused and protecting the right of the people. Judicious use of the legal tool  is necessary as any unwarranted usage can result in huge loss.

CONCLUSION

As businesses are going global, effective trade secret protection is becoming a necessity. Though there is no enactment in India that affords protection to trade secrets, businesses can use some of the tools discussed above to safeguard these trade secrets[7].


[1] https://www.wipo.int/sme/en/ip_business/trade_secrets/trade_secrets.htm, visited on 26-06-2021 at 16:11hrs.

[2] Protection of Trade secret and Confidential Information : India Perspective – Legal News / Law News & Articles – Free Legal Helpline – Legal Tips : Legal India, visited on 26-06-2021 at 17:01hrs.

[3] IBID.

[4] IBID.

[5] LexlLIFE India -Trade Secret Protection in India: An Analysis, Trade Secret Protection in India: An Analysis – Lexlife India, visited on 26-06-2021 at 17:34hrs.

[6] IBID.

[7] Ramesh Vaidyanathan -Trade Secrets And Confidential Information, Trade Secrets and Confidential Information | Advaya Legal Blog,visited on 26-06-2021 at 19:15hrs.

Aishwarya Says:

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