A Critical Analysis On The Legal Protection For Trade Secrets In India by - Priyanka Jeyakumar
A
Critical Analysis On The Legal Protection For
Trade
Secrets In India
Authored
by - Priyanka Jeyakumar
Abstract
Intellectual
Property has become a matter of utmost significance for every single person who
is involved with the Intellectual Property and the demand of the Intellectual
Property is gradually intensifying day by day. Intellectual property is a
property which is created from human intellect or mind. The most well-known
forms of intellectual property include patents, copyrights and trademarks but
one among the forms of intellectual property which has become increasingly
significant during the past few decades is the ‘Trade Secrets’. The prime
object of this Paper is to manifest a brief outline about Trade Secrets,
elucidating the different definitions of it granted by various sources in the
world and analyzing the ‘Trade Secrets Protection Laws’ which are recognized in
major economically developed countries in the world. It reveals the
significance of Trade Secrets in the current technologically developing world
and the exigency of having a comprehensive law for the efficacious and feasible
protection of ‘trade secrets’ in India taking into consideration the precedents
of various Indian courts which have upheld the trade secret protection on the
basis of principles of equity and common law, by way of various Indian laws
where there is an indirect and implicit mention of the protection of Trade
Secrets and with the aid of the international experiences.
Key
words: Trade Secret, Intellectual, Precedents, Access,
Protection
INTRODUCTION:
“Intellectual Property is a key aspect for
Economic Development.”
- Craig Venter
Every time a person makes or owns a
piece of property, there is a reasonable expectation that they will take
pleasure in it and enjoys the property. The enjoyment may be either by any
personal use or any monetary benefit or profit out of that property. As far as
self-created property is taken into consideration, the property requires
sufficient skill, labour, capital and application of mind. A property which is
created by an intellectual or mind is called as Intellectual Property. The
creator or the owner protects such property by the Intellectual Property
Rights. In current times, knowledge and ideas are at the core of trade. Since
these concepts give business concerns an advantage, help them maintain a
competitive advantage in the market, and advance their economic interests, the
necessity to preserve them has become of the utmost importance as a result of
globalization and the rapid industrialization of the world. To prohibit others
from utilising their innovations, designs, or other works, corporations, especially
those with multi-national operations, must use this right to demand payment in
exchange for others using them. The term “Intellectual Property Rights” is used
to describe them. Intellectual property rights are regarded as pay-off for
the innovative and inventive work in the implementation of
ideas. The significance of intellectual property rights has recently become
widely realized and acknowledged.
Countries
have laws to protect intellectual property in the economic, scientific,
literary, and artistic domains for two basic reasons. One is to give formal and
statutory expression to the public's right to access these works of art as well
as the moral and financial rights of authors to their works. The second is to
actively foster creativity, as well as the dissemination and application of its
findings, as well as fair dealing, which would support both economic and social
progress.
Intellectual
Property Protection is the key element for the economic expansion and
development of high technology sector. In order to maintain the value of their
investment in what is peculiarly theirs, those who conduct scientific and
technological research, those who create and interpret works of learning,
culture, entertainment, and information, and those who design the marketing of
products and services all look to legal protection against unfair competition.
It is difficult to clearly define the right to prevent others from unfairly
exploiting ideas or information for their own commercial gain. Because of the
need for a sophisticated legal mechanism, intellectual property has become a
somewhat obscure field.
The protection of patents,
trademarks, and copyrights are the first things that come to mind when people
think of Intellectual Property Rights (IPRs). A few individuals add "trade
secrets" to the lists after a brief pause; however, in general, other IPRs
are unaware of the vast potential of "trade secrets”.
Meaning and Nature of ‘Intellectual
Property’:
First, one must comprehend the
concept of property in order to comprehend the nature of the intellectual
property. Because intellectual property is a type of property, it possesses all
of the characteristics of property with the exception of the fact that it was
created through the use of the human brain, or intellectual. Everything that is
either, corporeal or incorporeal, tangible or intangible, visible or invisible,
real or personal, chooses in action, and everything that has exchangeable value
or is going to make up one's wealth or estate is included in the concept of
"property." According to the Encyclopedia Americana: “Anything
whether tangible or intangible, which can be reduced to possession or made the
subject of ownership comes within the legal definition of property”[1]
Intellectual
property is in the nature and kind of 'intangible incorporate property'.
Because it falls under the definition of property, it can be dealt with in the
same way as other properties, and it can be mortgaged and licensed. Legally
speaking, intellectual property is a property; it is something that can be
fixed and owned. Even statutory forms have been recognized as producing a form
of property right, despite the fact that statutory intellectual property forms
are declared to be property rights.
WHAT IS A ‘TRADE SECRET’?
Trade
secrets are another important category of intellectual property. Although they
do not belong to the traditional category of intellectual property, they have
gained worldwide recognition in recent years. In this age of globalization, it
is critical to protect traders' interests. Despite the fact that
anti-competition laws are in place to prevent excessive market control, trade
secret law safeguards the trader's interests by safeguarding business secrets
in an era when businesses are conducted worldwide.
A
business can gain an economic advantage over competitors by using a "trade
secret," which is a formula, practice, process, design, instrument,
pattern, or compilation of information that is not generally known or
reasonably ascertainable. Trade Secrets are kept secret from the general
public. Instead, owners of trade secrets keep it a secret to protect their
“trade secrets”-related information from competitors through technological and
legal safeguards, as well as special handling procedures. The owner either
keeps the "trade secrets" to himself or only lets a small number of
people who really need to know them in order for the business to run smoothly
have access to them. Because they involve an owner's financial interest,
"trade secrets" must be protected. A company's internal processes may
be regarded as a trade secret because they give the company an advantage over
its rivals. For instance, safeguarding "trade secrets" can give a
company an advantage in low-cost production, leading to an increase in revenue
and customers. Businesses benefit from innovative ideas, products, and business
practices because they help them maintain market dominance and advance their
economic interests. Because of this, it is necessary to prevent others from
profiting from innovative ideas and knowledge also known as confidential
information or "trade secrets" in common parlance.
Nature and Definition of ‘Trade
Secrets’:
In
general, a "trade secret" is any secret business information that
gives a trader a competitive advantage over others. Both commercial secrets and
manufacturing or industrial secrets are referred to as "trade
secrets". It is considered an unfair practice and a violation of the trade
secret for individuals other than the holder to use such information in an
unauthorized manner. The protection of "trade secrets" may or may not
be based on specific provisions or case law that establishes precedents for the
protection of confidential information, depending on the legal system in
question. The terms "sales methods," "distribution
methods," "consumer profiles," "advertising
strategies," "lists of suppliers and clients," and
"manufacturing processes" are typically used to describe the subject
matter of trade secrets. Industrial or commercial espionage, breach of
contract, and breach of confidence are clearly unfair practices in relation to
secret information, although the final definition of what information
constitutes a trade secret will depend on the specifics of each case. It could
be a formula[2],
computer program[3], process[4],
method[5],
device[6],
technique[7],
pricing data[8],
customer lists[9], or any
other secret information.
Here are few important definitions of
‘Trade Secrets’ by various renowned sources:
North American Free Trade Agreement
(NAFTA) defines a
Trade Secret as “information having commercial value, which is not in the
public domain, and for which reasonable steps have been taken to maintain
secrecy.”
The Trade Related Aspects of
Intellectual Property Rights (TRIPS) establishes three essential conditions for any information
to be considered undisclosed information (trade secret), they are:
i.
Such
information must be secret, i.e., not generally known or readily accessible to
persons within the circles that normally deal with the kinds of information in
question.
ii.
The
information must have commercial value because it is secret.
iii.
The
information must be the subject of reasonable steps by its owners to keep it
secret.
The Uniform
Trades Secrets Act, 1970 also lays out the definition of trade secrets,
which is as follows:- "Information, including a formula, pattern,
compilation, program device, method, technique, or process, that:
(i)
derives
independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use, and
(ii)
is
the subject of efforts that are reasonable under the circumstances to maintain
its secrecy”.
SIGNIFICANCE OF TRADE SECRETS:
For
a variety of reasons, the number of trade secrets in the industrial economy has
increased significantly in recent years. That is primarily due to two factors,
one of which is the uncertainty of other forms of intellectual property, such
as patents, trademarks, and copyright, in comparison to Trade Secret. Second,
trade secrets have become more important because technology is changing so
quickly in many areas that it has outpaced the laws in place to encourage and
protect innovations.
The
relative ease with which trade secret rights can be created and managed is
another significant factor that has contributed to an increase in the value of
trade secrets. There are no lengthy wait times for government grants like
patents, nor are there any delays caused by bureaucracy. In contrast, trade
secret rights can be established through explicit behavior or agreement among
interested parties. A trade secret right begins when a concrete idea is created
and continues as long as the idea is kept secret. Trade Secrets can be used to
protect information that does not qualify as intellectual property under the
law, such as ideas or information. These types of information can be protected
under the country's intellectual property laws. Again, as long as secrecy is
maintained, they have the advantage of lasting forever. Because it encourages
foreign investment in numerous fields, intellectual property protection is one
of the most important tasks in any developing nation. We continue to rely on
the old-fashioned Common Law Principles for Protection of Trade Secrets because
India does not have any appropriate laws to protect trade secrets; in the
context of an expanding economy, these Common Law Principles have lost their
significance. A proper policy framework is absolutely necessary to regulate
trade secret protection. Trade Secrets are a preferred method of intellectual
property protection for many businesses, particularly chemical firms. These
businesses are reluctant to invest in India due to the country's inability to
adequately safeguard their trade secrets. As a result, India is losing a lot of
foreign direct investment.
INTERNATIONAL FRAMEWORK OF PROTECTION
OF TRADE SECRETS:
"Intellectual Property
Rights" protection is one of the significant contemporary legal issues in
the worldwide trade domain. As international trade and investment widens in the
world, copyrights, trademarks, patents and "trade secrets" have
become subjects-matters of more global frame of reference. The need for legal
protection of products, which are the result of the human intellect in the
global trade and venture setting from the perspective of developed nations, is
obvious. With globalization, it has become vital to give effective protection
of "trade secrets". All through the world laws are figured out in such
a manner. A study of major financially flourishing nations overall is required
to comprehend the idea of "trade secrets". The Intellectual Property law incites
industrial progress; the law of "trade secrets" is progressively
grabbing international attention.
Protection
of "trade secrets" has been presented by several countries all
through the world. Every one of the nations is a member country of
"WTO" and thus follows "TRIPS agreement". India likewise
being a signatory to "TRIPS agreement" it becomes essential to
concentrate on the degree of security given to trade secrets in different
signatory nations of "TRIPS agreement".
Trade
Secrets have been provided protection by many “agreements” and “countries”
throughout the world. Few of them are:
North-American Free Trade Agreement
(NAFTA):
Member
nations should safeguard trade secrets from unapproved accession, divulgence,
or use. Cures should incorporate injunctive relief and damages. Because of
NAFTA, Mexico has altered its 1991 trade secrets law to allow private litigants
to get injunctive relief.
General Agreement on Tariffs and
Trade (GATT):
On April 15, 1994, the major
industrialized countries of the world, including the United States, finished up
the Final Act coming about because of the Uruguay Round of GATT (General
Settlement on Levies and Exchange). GATT laid out the World Trade Organization
(WTO) and proclaimed different trade-related agreements including TRIPS or the
Trade-Related Aspects of Intellectual Property Rights.
Under
GATT, "undisclosed information" should be safeguarded against use by
others without the assent of the owner assuming the utilization is in
opposition to legit business rehearses. Likewise, there is third-party
obligation for misappropriation if third parties were negligent in not knowing
that such information had been received dishonestly.
Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS):
Article 39 of the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of
the World Trade Organization addresses the issue of the protection of
undisclosed information. On January 1, 1995, this agreement went into effect
and established a global standard that requires WTO members to safeguard
undisclosed information, such as test results from pharmaceutical and
agricultural products. Under Article 39 of the Agreement, the TRIPS obligates
member states to ensure the protection of undisclosed information. In addition,
member nations are obligated under the TRIPS Agreement to provide efficient remedies
for the misappropriation of trade secrets, such as (a) injunctive relief, (b)
damages, and (c) provisional relief to prevent infringement and preserve
evidence.
The three requirements of
Article 39 of TRIPS are well matched by the country-specific definitions of
trade secrets. In point of fact, in this regard, TRIPS reflected the practice
that was in place at the time in many nations and has influenced subsequent
legislation. The following is how the TRIPS requirements for trade secrets are
now typically implemented in practice:
i.
Secrecy:
It is necessary for secret information to be protected. There is no need for
total secrecy. Employees and business partners may receive the information from
the owner of the trade secret. Instead, secrecy requires that the information
is not readily available to the public and that it be disclosed to others only
under circumstances that maintain secrecy with regard to the general public.
ii.
Commercial
Value: Because it is secret, the information must have economic value. The
majority of the time, trade secret law safeguards commercial data; that
information must be useful from being kept secret.
iii.
Reasonable
Efforts to Maintain Secrecy: The owner of the rights must make reasonable
efforts to keep the information confidential. A trade secret claim typically
arises when measures to safeguard the information have failed. Therefore,
claiming a trade secret does not necessitate full success in protecting it, as
stipulated by the law. However, the owner is obligated by the law to protect
the secret. In accordance with Article 39 of TRIPS, the necessary effort is
frequently referred to as "reasonable" in broad terms in national
laws. However, some nations impose additional obligations that are more
specific and could be described as a particular application of the broad
reasonableness requirement. A contractual or implied obligation to keep the
information secret is one example of a common law requirement in some nations.
In addition, confidentiality notices and written agreements with recipients are
required in other nations.
Different kinds of intellectual
property rights are recognized by the "TRIPS Agreement." The goal of
the agreement is to recognize and safeguard intellectual property rights
worldwide. The agreement established global uniformity in intellectual property
laws. Intellectual property rights and regulation are laid out in detail in the
agreement. The terms of the "TRIPS" agreement have been incorporated
into the laws of every state that is a member, either through additions to
existing laws or new laws.
COMPARATIVE ANALYSIS OF ‘TRADE
PROTECTION LAWS’ IN A GLOBAL PERSPECTIVE:
“I am a strong believer that the
Intellectual Property Rights need to be protected.”
- Jim
Oberweis
Brazil:
Brazil
updated its intellectual property laws in 1996. The protection of trade secrets
comes under the purview of "unfair competition". A variation of Section 757 (6-factor) test,
which is borrowed from U.S. law, is used to determine whether a particular
piece of information is protected as a trade secret. Common knowledge,
information that is in the public domain or information that is obvious to an
expert in the field cannot be protected as trade secrets. The owner of the
trade secret must take effective measures to keep the information secret.
Compensatory damages, punitive
damages, and injunctions are all options for relief. Anyone who releases,
exploits, or uses a trade secret that they had access to through a contractual
or employment relationship without permission is also subject to criminal
penalties.
Japan:
Japan
enacted a National Trade Secrets Law on June 15, 1991. Any "technical or
business" information that has commercial value, is not publicly available
and has been "administered" as a trade secret is considered a trade
secret. Trade secret theft, fraud, or extortion, as well as the unauthorized
use or disclosure of a legally acquired trade secret for unfair competition,
all constitute infringement. Injured parties may seek damages and injunctive
relief. Additionally, the owner of the trade secret has the right to demand
that any products produced using the secret that was obtained illegally be
destroyed. The Uniform Trade Secrets Act is comparable to the statute. For
example, the trade secret violation must be reported within three years of its
discovery. The statute does not contain any criminal penalties.
China:
The Law of the People's Republic of
China (PRC) against the Unfair Competition (Unfair Competition Law) was passed
in September 1993, and it went into effect on December 1 of that same year.
This is the first Trade Secret Law of China. The definition of "trade
secrets" is information about management and technical matters that is hidden
from the general public, has practical value, and has the rightful owner taking
steps to keep it secret. Article 10 of the Unfair Competition Law says that
businesses cannot do certain things, and the law also says what to do if trade
secrets are violated.
Korea:
Korea's
laws were also changed in 1991 to make trade secrets legally protected. During
a US litigation between GE and a Korean company that had acquired GE trade
secrets from a former GE employee, this law, which went into effect on December
15, 1992, was enacted.
Israel:
Employee
disclosure of trade secrets is criminally prohibited in Israel (Penal Law 1977
Section 496). Trade secrets and industrial know-how are prohibited by employee
contracts. Employers and employees are obligated to maintain confidentiality.
Numerous additional nations, including the United Kingdom, Canada, Mexico,
France, Germany, the Czech Republic, Hong Kong, and others, are included in
this list through their various old and new laws, provide protection for trade
secrets and confidential or undisclosed information.
POSITION OF TRADE SECRETS IN INDIA:
“Intellectual Property has the shelf
life of a banana”
- Bill Gates
The field of trade secrets appears to
be neglected in India since there is neither a law nor a policy framework in
place to protect trade secrets, This form of Intellectual Property is another
entrant in India, yet is by the by, a vital field of Intellectual Property. In
order to conduct business with our nation, foreign investors need assurance
that their trade secrets will be safeguarded. Our own industry's security will
be further enhanced by a proper trade secret protection policy. As a signatory
to TRIPS, India is also obligated to amend or create a new law to safeguard the
trade secrets of various businesses. Almost every nation in the world has a policy
for the protection of trade secrets. In order to provide a sense of security to
both local businesses and foreign investors regarding their trade secrets,
which will further boost the Indian economy, India needs to implement a proper
policy for the protection of trade secrets.
If
kept secret, "trade secrets" remain secure for all time. It ceases to
be secret if the information's confidentiality is violated. Because India is a
world economic power, it is critical to safeguard the interests of traders, businesspeople,
and other individuals. India, as a WTO member and a signatory of the TRIPS
Agreement, is required to abide by the provisions of the TRIPS Agreement when
it comes to intellectual property protection of "trade secrets."
As
referenced above, in India, no considerable definitive text or case regulations
are accessible to decide the nature or ambit of trade secrets. Be that as it
may, the Indian courts have taken a stab at putting the trade secrets of
different business under the domain of different legislations to safeguard them
and furthermore they have attempted to characterize what a trade secret is in
different cases, some of them are as per the following:
In the case, American Express Bank
Ltd. v. Ms. Priya Puri[10],
‘trade secret’ is defined as “…formulae, technical know-how or a peculiar mode
or method of business adopted by an employer which is unknown to others.” In
the cases Micheal Heath Nathan Johnson v. Subhash Chandra[11]
and John Richard Brady and Ors. v. Chemical Process Equipments Pvt. Ltd. And
Anr.[12], the
Hon’ble Court observed the disputes of the counsels who alluded to English
decisions to characterize 'trade secrets'. In the case of Mr. Anil Gupta v.
Mr. Kunal Dasgupta and Ors[13],
the Delhi High Court ruled that the plaintiff's concept is the result of his
work with material that could have been used by anybody. However, the fact that
the plaintiff used his brain to produce a result in the form of a concept is
what makes it confidential.
Protection of ‘Trade Secrets’ under
the ‘Indian Contract Act, 1972’:
The Indian Contract Act, 1872, gives a
structure of rules and guidelines overseeing the development and execution of
contract in India. In India, the essential legal arrangement for protection of
"trade secrets" is represented by Section 27 of the India Contract
Act, 1872[14], and
other than that, common law likewise provides protection. However the
expression "trade secrets" is no place referenced in the provision of
the section however courts have interpreted Section 27 of the Contract Act to
incorporate understanding which can safeguard trade secrets as non-disclosure
furthermore, non-compete agreements.
An
understanding in restraint of trade is characterized as an agreement on account
of which, a party concurs with some other party to limit his liability in the
present or in the future to carry on a trade or profession himself or with
different people not parties to the contract without the express authorization
of the latter party. These negative covenants stay operative during the time of
agreement. In such cases, the question precedes the court is that whether the
restraints put by the employer are reasonable or not. In the event that, the
restriction is put for the protection of "trade secrets" or
confidential information to thrive of the trade then it is considered as
substantial and a valid restraint.
One
of the principles of valid restrain is that a master is allowed to restraint
his servant after the termination of employment for reasonable protection
against abuse of "trade secrets" and support of business privacy. In
a contract of employment, it is not simply the employee's right, which is the
concern. The rights of the employees are coupled with the liabilities as well.
With regard to the employee, he owes an obligation of loyalty to his employer.
The employee should not reveal to others the confidential data, which he learns
or acquires throughout the course of employment. An injunction may be allowed
against the disclosure of such data by the employee. In any case, this does not
stretch out to all data or information, which could now and again be required
during employment. An employee is qualified to safeguard confidential
information as it were which adds up to a trade secret.
Confidential
information should be exceptionally confidential before it has been named as a
trade secret. There are certain factors that must be considered previously
naming information as "trade secrets". The nature of work, first and
foremost, continued information should be reviewed. Thirdly, it should be seen
whether the employer requested the employee to keep the information
confidential. The judicial precedents show that contractual restraints prevail
for the protection of trade secrets. Be that as it may, there is an absence of
consistency and uniformity in the decisions.
In
the case of Star India Limited v. Laxmiraj Setharam Nayak[15],
the court ordered that, the respondent will not unveil or reveal the
plaintiff's business strategies and franchisee agreements which he has come to
be aware of during his course of employment.
In
the case, Diljeet Titus v. Mr. Alfred A. Adebare and Others[16],
the defendant, an advocate was in full-time working at the plaintiff's law
firm. Upon the discontinuation of employment, the defendant took away essential
business information, such as client records also, proprietary drafts, of the
plaintiff. The plaintiff contended that such data is "trade secrets"
of the firm and cannot be utilized by the defendant. The defendant argued that,
since the express relationship between the parties was not that of an employee
and employer, so they were the owners of the copyright of the work done by them
during their employment. The court denied the relationship and decided that the
plaintiff had an unmistakable direction in the material taken away by the
defendant. Appropriately, the court restrained the defendant from carrying on a
similar service by utilizing the concerned restricted secret information. The
defendants were just limited from utilizing the data they took, as this was
important to safeguard the interest of the plaintiff.
An
employee may not be limited from taking up employment in the event that it
cannot be proved by the employer that the employee may, on joining a rival,
unveil private data and secrets learned during the course of employment.
In
Gopal Paper Mills Limited v. Surendra K. Ganesh Das Malhotra[17],
the plaintiff carried on a business and the respondent was selected as a
colleague to serve for a time of twenty years. During the twenty years he was
denied to offer guidance or administrations to some other individual or
organization or then again offer any data to any individual, which he could get
or acquire during the course of employment concerning the undertakings of the
plaintiff. The defendant left the service following one year of joining. An
injunction was sought by the plaintiff. It was demonstrated that no
confidential data was provided to the defendant during this one year of
service. The court refused to grant an injunction to the plaintiff on the
ground that, as no "trade secret" or confidential information was
granted to the defendant, and hence in this way the subject of safeguarding the
employer's interests would not ever emerge. Such a view is taken by the courts
to safeguard public policy. This might be perceived as in, there will be
restrictions in competition assuming that an injunction is simply given in the
cases based on an agreement where no confidential data or information is
disclosed.
Similarly
in Jet Airways Ltd. v. Mr. Jan Peter Ravi Karnik[18],
the appellant company utilized the defendant as a pilot. The company had
coordinated training to empower the defendant and different pilots to fly
new-age airplanes. There was an agreement made between them that the defendant
will serve the appealing party for a period of seven years and not to take up
similar work with some other organization during that period. Nonetheless, the
respondent resigned within six months of the fruition of training and joined
another airline. An injunction was sought by the appellant airline company. The
"Bombay High Court", denied restraining the defendant from taking up
employment with an opponent airline in light of the fact that the negative
covenant was one-sided and an unreasonable one. The court held that there was
no trade secret of the employer that necessitates protection. The court
recognized the current realities of the Jet Airways case from that of
Golikari's case[19] and
held that the training got by the defendant in the current case was not a
secret not at all like Golikar's situation. Indeed, even the workers of the
contender airline got similar training which is given by the appellant
airlines. The defendant had not got any exceptional information on any trade
secret that had a place solely with his employer.
Provision under the Indian Contract
Act – not adequate with regard to protection of ‘Trade Secrets’:
The
Indian Contract Act, 1872 deals with the legal validity of non-compete
covenants[20] under
Section 27 and specify that, an agreement, which limits or restraints anybody
from carrying on a lawful profession, trade, or business, is void to that
extent. The Indian law has specific streams in the setting of the present time.
The Indian law is rigid and inflexible in that it negates all restraints,
whether general or partial, and neither the test of reasonableness nor the test
of restraint being fractional applied to a case represented by Section 27 of
the "Indian Contract Act, 1872", except if they fall inside the
section of the part. This stems from the fundamental rights of each and every
individual to rehearse any trade, business, or profession.
The
intent of Section 27 of the "Indian Contract Act, 1872" was to
safeguard traders from restrictions at a time when trade was still in its
infancy. But as trade in India has grown over time, there is no reason why a
more liberal attitude should not be taken by acknowledging reasonable
restrictions. The report also stated that trade in India does not lag behind
that in England or the United States, and it recommends that the words "is
to that extent void" be substituted in section 27 of the "Indian
Contract Act, 1872" for the words "is to that extent void except in
so far as the restraint is reasonable having regard to the interest of the parties
to the agreements and of the public." In light of these observations, the
"Law Commission of India" recommended that this section be amended to
permit reasonable restraint on the right to carry on trade.[21]
When
it comes to the protection of "trade secrets" in the form of confidential
information, Indian courts have for some time protected the interests of
traders by liberally interpreting the provision under Section 27 of the
"Indian contract Act, 1872". However, there is a lack of uniformity
in the rulings because there is no specific legislation in this area. Because
Section 27 only covers one aspect of "trade secrets", non-compete
clauses, it is high time for a separate law to protect "trade
secrets." The section does not address other issues, such as stealing
trade secrets, misappropriating "trade secrets" for use by third
parties, or disclosing "trade secrets" to the public to cause loss.
This section is used in the course of judicial activism to protect "trade
secrets" from an ex-employee, but its actual purpose is to invalidate
restrictions on trade, which is different from the kind of protection needed
for “trade secrets”.
It
is generally acknowledged that Section 27 protected employers' "trade
secrets" from employees, but as science and technology advance, new
protections are required, which Section 27 does not provide. The Indian
"Indian Contract Act, 1872" provides some protection for "trade
secrets," others are covered by common law, and some are covered by the
"Indian Penal Code 1860": as well as the "Information Technology
Act, 2000." In addition, in order to establish an appropriate system of
"trade secrets" protections, a specific piece of legislation is
required to safeguard all aspects of "trade secrets."
Other Indian Laws which deal with
‘Trade Secrets’:
Copyrights Law also safeguards Trade
Secrets involved in the business data. In addition, a specialized regulatory
approach for the protection and privacy of personal and non-personal data in
any form (digital or non-digital) was established by the Personal Data Protection
Bill of 2019.
Violations of privacy and
confidentiality are punishable under Section 72 of the Information Technology
Act of 2000.
Criminal breaches of trust are
addressed in Sections 405–409 of the Indian Penal Code of 1860.
CONCLUSION:
“Intellectual property is an
important legal and cultural issue. Society as a whole has complex issues to
face here: private ownership vs. public source and so on”
- Tim Berners-Lee
From the "Paris Convention"
to the "TRIPS Agreement", a number of international agreements have
been enacted to safeguard various kinds of intellectual property. All member
states' intellectual property rights laws are now governed by the "TRIPS
Agreement". Because it has reconstructed intellectual property laws around
the world, the agreement could be referred to as the "Magna Carta" of
intellectual property rights. In order to acquire and safeguard intellectual
property, business entities spend a significant amount of money on research and
development. The legal framework for intellectual property rights (IPR) is
undergoing active adjustments to meet the challenges and attempt to meet new
challenges brought about by technology convergence. Article 10bis of the Paris
Convention, which emphasizes the nature of protection against unfair
competition, and Article 39 of the World Trade Organization's (WTO)
"Agreement on Trade-Related Aspects of Intellectual Property Rights"
(TRIPS) "Agreement on Trade-Related Aspects of Intellectual Property
Rights" (TRIPS) address protection of ‘undisclosed information’.
Copyrights, trademarks, patents,
designs, and other forms of intellectual property are just a few of the assets
that enjoy statutory protection, though there are some restrictions. Trade
Secrets are also a form of intellectual property but are not statutorily
protected. In order to safeguard the interests of traders and businesses and
accelerate economic growth, a developing nation like India must provide adequate
protection for "trade secrets". Adapting trade regulations to
international standards becomes critical in the age of globalization. India, a
fast-growing market for international trade and a member of numerous
organizations, is required to adopt international standards. Despite being a
member of the "United Nations" and a signatory to the "TRIPS
Agreement," India does not have a specific law regarding confidential
information and "trade secrets." In terms of intellectual property
rights, this is the only area in which India is behind.
The Indian government released a
"Draft National Innovation Act" in 2008 to boost research and
innovation as a response to the "TRIPS" agreement. The government's
passing of the "National Intellectual Property Rights Policy" is a
significant indication of its interest in the recognition of "trade
secrets" as distinct intellectual property.
The effective safeguarding of
"Trade Secrets" is not a singular legal instance. It must be viewed
not only from the standpoint of INTELLECTUAL PROPERTY RIGHTS but also from the
standpoint of India's economic governance. In India, the protection of
"Trade Secrets" is linked to a viable and efficient
"INTELLECTUAL PROPERTY REGIME" for both the protection of existing
knowledge and the promotion of invention, innovation, and the development of
original ideas. Without effective, adequate, comprehensive, and fair protection
of "Trade Secrets," the protection of "Trade Secrets" is
insufficient. By establishing and maintaining favorable trade and business conditions
in various regions or by expanding into newer regions, this, in turn, has the
potential to significantly contribute to the development of the national
economy.
Along with other national obligations
to its citizens, maintaining compatibility and commitment with the international
market is one important condition for flourishing trade and business. This
cannot be accomplished without developing and enacting international-standard
laws that strongly safeguard national interests. Therefore, in both domestic
and international economies, law is of the utmost importance as an efficient
and attainable tool for bringing about economic change and ensuring that
development reaches the expected level. In this era of globalization, traders
and investors seeking to invest in India require assurances that national law
will safeguard their secrets. Additionally, the government is currently
encouraging trade. Trade and investment will boom in India if "trade
secrets" are effectively protected.
Given that the existing legislative
provisions are neither specific nor effective, it is high time for a specific
law to be enacted to protect "Trade Secrets".
[2] An illustration of a trade secret
that is a recipe or formula is the secret Coca-Cola formula that is kept in a
vault. It has never been made public because it has not been patented.
[3] To prevent unauthorized use and
access to their software, businesses should make reasonable efforts. The value
of the trade secret and the measures that others in the industry take to
safeguard their source code will influence these measures.
[4] Process of manufacturing specific
products which is not known by others and has monetary worth. For instance, the
rubber industry of Thailand has utilized trade secret protection to protect
know-how of the rubber recuperation process.
[5] Method of preparing 'barbecue
chicken' under KFC food-chain is not unveiled to anyone, despite the fact that
the ingredients are revealed.
[6] For instance, a Device made for
removing petroleum from unrefined petroleum (crude oil) so that the cost of
creation will descend and the benefit will get improved.
[7] For an instance method of getting
in shape by doing a particular kind of activity with admission of certain
unique kind of diet might be kept secret by a body slimming center.
[8] Microsoft, for instance,
negotiates pricing with its significant clients and requires those customers to
keep their prices undisclosed.
[9] Customer list of a specific trader
can be kept secret by a dealer with the goal that other traders cannot move
toward the client or the customer and as a resultant he would have a permanent
customer.
[14] The Indian Contract Act, 1872 (
Act 9 of 1872) s.27: Agreement in restraint of trade void:
Every
agreement by which any one is restrained from exercising a lawful profession,
trade or business of any kind, is to that extent void.
Exception 1: Saving of agreement
not to carry on business of which good-will is sold-
One
who sells the goodwill of a business may agree with the
buyer
to refrain from carrying on a similar business, within
specified
local limits; so long as the buyer, or any person deriving
title
to the goodwill from him, carries on a like business therein,
provided
that such limits appear to the Court reasonable, regard
being
had to the nature of the business.
[19] Niranjan Shankar Golikari v.
Century Spinning and Manufacturing Company Limited, AIR 1967 SC 1098.
[20] ‘Non-compete clauses’ or covenants
are standard in the agreements of employment. Through non-compete clauses,
pioneers and key executives leaving the business are limited by specific
limitations. As per non-compete clauses, an individual consents not to begin
another business, take up employment or participate in any way with some other
competing body. Such limitations are typically restricted by a period and by
particular geography, and that implies that the individual will not be allowed
to work in competing during a specific period, inside the recognized geography.
[21] The Law Commission of India, 13th
Report on the Contract Act 1872 (26 September 1958) Para 55 at 26-27.