In the current era of globalization, companies are now taking efforts to be creative and innovative to remain up in the business. The need for protection of trade secret is emerging and various countries are stepping forward to include new legal framework to deal any infringement of Intellectual property and for the betterment of companies. In India, currently the trade secrets have been well protected under law of equity and law of contracts and by judicial rulings as well but a separate legal legislature would help in dealing with disparity. In this paper, an attempt has been made to cover all the aspects linked to trade secret law in India by highlighting the concept of trade secret, current framework of trade secret protection in India. Further, this paper also throws light upon the remedies available for any infringement made and case laws discussing the same; followed by set of conclusion and recommendations.
Keywords: Trade secret protection, Judicial rulings, law of equity, law of contracts, breach of contractual obligation.
1) A meticulous approach has been adopted while preparing this research paper, with an aim to connect the readers to the researcher of this paper and to help readers to enhance their knowledge on the subject matter.
2) A historical study that concentrate on the status of the “Trade secret law in India” by the way of case-laws, statues and legal sources.
Any information or data that relates to businesses which is not known to the general public with an attempt to keep it confidential qualifies as a Trade secret. It is extremely important for a company just like other intellectual property rights for company’s growth and company’s survival from the competitors operating similar kinds of business.
Trade secret may refer to any kind of practice, process, design, instrument, or compilation of data or information which is not known to the general public and reasonable care has been taken by the owner of the company to keep it confidential and protect it from the competitors.
According to Article 39.2 of the Trade-related Aspects of property Rights (TRIPS) there are three criteria that require to be taken into consideration;
(a)The information isn’t, as a body or within the precise configuration and assembly of its components, generally known among or readily accessible to persons that normally affect the sort of knowledge in question;
(b)The information has actual or potential commercial value because it’s secret;
(c)The person lawfully on top of things of the knowledge has taken reasonable steps under the circumstances to remain it a secret.
The Uniform secret Act, 1979 adopted within the use of America, defines trade secrets as information which includes formulae, patterns, compilations, programs, devices, methods that:
(a)Derive independent value from not being generally available or known to or not being easily ascertainable by proper means by others who can obtain value from its disclosure.
(b)It is that the topic of efforts that are reasonable under the circumstances to require care of its secrecy.
Financial records, customer lists, customer details in conjunction with strategies and policies of the companies also can be considered trade secrets. However, in India, details of consumers were held to not be considered as trade secrets or property. It had been held that the target of secrecy is utility so a secret possesses to be utilitarian in nature.
What Is Proctactable As A Trade Secrete ?
trade secrets are primarily protected under the principles of equitable law and law of contracts, information which is kept confidential and maintained as a secret by the owner from its competitor and general public qualifies to be trade secret. Following are the three factors that cause any data or information to be considered as a trade secret:
• The information not known in general or easily accessible to people dealing with such information.
• The information possesses commercial value as a secret
• Reasonable efforts taken by the owner to main its confidentiality.
Current Framework Secret Protection In India
In recent times of globalization, where companies are growing and seeking cheap labour, it becomes difficult to protect the trade secrets and other business strategies. Once the information on trade secret gets known to the public or any competitor, the competitor might start innovating using that secret which takes away the right of the owner to enjoy the benefits and also patenting such information becomes difficult in such cases. Any small player in the market with a fresh development can be seized by the other big players of the market hence it becomes difficult for these small players to remain up and flourish their business. Considering issues with respect to secrecy, countries today has recognised the need of it and now making efforts to include it in their legal frameworks. The development of secret protection is often traced to Trade-related Aspects of property (TRIPS), the General Agreement on Tariffs and Trade (GATT) and North American trade Agreement (NAFTA).
Currently the trade secrets have received protection through judicial rulings and through various provisions and aspects of contract law, torts, and equitable law. Although the absence of legislation for trade secrets has made judicial rulings burdensome but judicial pronouncements have always tried to protect and develop secrets and even to provide judicial remedy for any kind of breach of confidentiality.
Judicial Rulings For The Protection Of Trade Secrets
There is no specific legal legislation to guard the trade secrets and confidential information in India. However, the Indian courts and tribunals seeks to guard the trade secret and other business confidential information. Action of misappropriation under common law can widely protect trade secrets. Any unauthorized manner of accessing confidential information of a third party or Breach of obligation of confidence can misappropriate trade secrets. This misappropriation can take place either by misappropriating information which was shared in confidence or taken by way of cheating or theft.
Following are the circumstances streamlined by the Indian courts out of which proceedings may arise:
a) When any employee comes into possession of a secret or any confidential information in normal course of his work, and either voluntarily or accidentally transfers that information to any unauthorized person;
b) When any unauthorized person (may be a new employer) encourages such an employee to provide him with such information as has been mentioned above; and
c) When, under a license for the use of know-how, a licensee is in breach of a condition, either expressed in any agreement or implied from conduct, to maintain secrecy in respect of such know-how and fails to do so.
Indian courts and tribunals have made it immensely clear that in the absence of a separate legal legislation for Intellectual Property, they will be protecting trade secrets through common law for the betterment of businesses in India.
• John Richard Brady and Ors v chemical change Equipment P Limited & Another
In this case, the court held that the plaintiff was successful in establishing a clear case of infringement of copyright and breach of confidentiality in reference to its technical information, specifications and drawings. Accordingly, the defendant was restrained from selling products associated with the plaintiff’s drawings and from transferring technical know-how and merchandise specifications owned by the plaintiff.
• Daljeet Titus and Ors v Alfred A. Adebare and Ors, 2006
In this case, the plaintiff had instituted a suit alleging infringement of copyright of its privileged information and breach of confidentiality by the defendants. The court held that the knowledge about the working relationship between the firms and therefore the role of a private person within the firm was confidential in nature. Furthermore, the court also upheld copyright in reference to a database including client information.
UNDER CONTRACTS LAW
Under the principles of equity and contractual obligation, courts have upheld secret protection in India. According to Section 27, the Indian Contract Act considers because of the availability concerning restraint of trade. This section says that any agreement that restrain trade will be void. Later, the Law Commission of India in 1958 gave its recommendation to allow reasonable restrain came into picture.
Remedies For Infringement Of Trade Secrets
In case of infringement, the remedy available is to seek either injunction or damages. The Specific Reliefs Act, 1877 may apply in the favour of the wronged as under the law of injunction in India. However, a need of transparent case and balance of convenience with an irreparable loss must be taken into account. In certain cases where there is insufficiency in terms of transparency in the case, grant of injunction is refused often. In order to obtain an injunction, there should be actual concealment of fact by the plaintiff in order to seek equitable relief. According to Section 41 (e) of the SRA, injunction cannot be specifically enforced by the court should not be granted.
Duration Of Protection For Trade Secrets
There is no statutory protection for trade secrets as much and they are protected under law of equity and law of contracts, the protection tends to cease in case of disclosure of any data or information and such information comes under public domain or the sensitive nature of the trade is compromised. As such there is no difference between voluntary disclosure of information and accidental disclosure of information of a trade secret made in India. Cessation of protection as a trade secret means any sort of disclosure of a trade secret made, irrespective of the circumstances. Controlled disclosure of any secret in India would be disclosure under contract, during which the owners are required to prove that their disclosure amounted to breach of contractual obligations. Any disclosure amounted to unauthorised disclosure of its trade secret; the owner may file for equitable relief.
CASE LAWS ON TRADE SECRETS
• Zee Telefilms Ltd v Sundial Communication Pvt Ltd, (2003)
In this case a dispute concerning an idea for a television programme was developed by the plaintiff, which was later conceived by the defendant. The plaintiff had presented its concept to the defendant for the tv programme in anticipation of a collaboration. The court held that since there was substantial similarity between the work presented by the plaintiff and therefore the defendant, which was clear case of infringement. The court also ruled that the utilization of the plaintiff’s concept by the defendant was within the nature of breach of confidentiality, which could prejudice the plaintiff’s business.
• American Express Bank Ltd v Ms Priya Puri (2006),
In this case, the plaintiff did not show that the defendant obtained the knowledge by conniving together with her colleagues. It had been concluded by the court that, due to her position within the organisation, it had been likely that the defendant was already in possession of the knowledge believed to be a secret by the plaintiff. Furthermore, there was no reasoning given by the plaintiff for its allegation of retrieval of data by the defendant through her colleagues. Therefore, the plaintiff was unable to get injunctive relief against the defendant.
• Though the law of trade secrets fits into the prevailing framework of law of torts, law of contracts and competition law, there are certain problems with reference to its inception within the field of property rights. However, a separate legislation for trade secrets would eliminate that disparity also. India, being a developing nation must have a strong law for shielding trade secrets. The TRIPS Agreement mandated that its Member States must change their laws and convey in new legislations to satisfy the obligations as under the TRIPS Agreement. It’s a high time now for a law to return into force in India that guards the trade secrets and confidentiality but also makes necessary amendments within the existing framework of Competition Act against misappropriation and regulation of such business information.
• The Criminal law of the country, the Indian Penal Code, 1860, also needs amending that gives for criminal liability in cases wherein there’s breach of confidence or disclosure of trade secrets almost like what exists in several Countries. The mere presence of a legal code doesn’t act as deterrence for people who enjoys such practices and thus intensive action and practice is additionally needed to stay such incidents cornered. The Companies Act, 1956 should even be amended with similar provisions that take due diligence with reference to trade secrets into its ambit. Thus, the businesses are often pro-active and vigilant while protecting their trade secrets. Companies, during this manner and for this purpose, must build a robust protection system around such information. Companies must also establish strong psychological loyalty amongst its employees to in order that nondisclosure and/or non-compete agreements are simpler and thus safeguarding its trade secrets is simpler.
• Taking the above considerations into effect, it’s reasonable to be of the opinion that secret protection in India is in its nascent stage and it’s essential for it to develop keeping in mind that India as a developing country needs laws and legislations to be conducive to the business environment so on transform the country into a bed of opportunities for companies off-shoring also as entrepreneurs that are trying to find competition conducive to their businesses without the fear of misappropriation of their trade secrets and confidential business information, the very basis that they thrive on.