MARK IT CONFIDENTIAL: THE NECESSITY OF LAW OF TRADE SECRETS BY - ANWESHA SINGH & SARAB LAMBA
AUTHORED BY - ANWESHA SINGH &
SARAB LAMBA
ABSTRACT
Intellectual Property Rights have
come to gain immense importance in today’s world where there is growing
competition to create and develop new ideas every day. However, trade secret as
an intellectual property right is immensely difficult to safeguard due to its
nature and lack of adequate recognition of the need of its protection. The
reason Coca Cola still remains unbeatable as a premier soft drink company is
because its recipe has been protected under the law of trade secrets which prevents
its disclosure in the open market and thereby, assists the company in gaining
advantage over its competitors. Protection under trade secrets offers its
creator a vast scope and it is an easier and cheaper way of intellectual
property rights protection, as compared to Patents or Copyrights. In India, trade
secret as an aspect of intellectual property has been ignored by lawmakers and
academicians, alike. It has a vast scope of application in modern world where
commercial espionage is on a rise. This article highlights the need for a sui
generis law on protection of such intellectual property. It also critically analyses the current
provisions of law under which trade secrets are protected and throws light on
the international jurisprudence regarding the same. Through this article the
reader will be able to get an overview of all the existing provisions of trade
secrets and the measures that should be implemented in order to gain maximum
effectiveness.
Key words: trade secrets, IPR, dedicated legislation, confidential information,
know-how, breach, protection, patent, trademark, copyright, innovation,
commercial, proprietary information, sui generis, exploitation, theft.
I.
INTRODUCTION
In the words of Bentham, a renowned English philosopher and jurist, who
expressed the inter-relationship between law and property in his book ‘Theory of Legislation’:
“Property and law are
born together, and die together. Before laws were made there was no property;
take away laws, and property ceases.”[1]
Owing to the constantly evolving liberalization and globalization of the
economy, developing measures for the protection of intellectual property has
gained paramount importance for encouraging foreign investment in the country.
Intellectual Property Rights (hereinafter, IPRs) play a significant role in
encouraging innovation, product development, and technical change. It also
stimulates acquisition and dissemination of new information. While extracting
these benefits, the need for safeguarding
it also increases by the hour.
One of the less recognized types of intellectual property is that of trade
secrets. Though trade secrets do not perfectly fit within the definition of the
conventional and more popular intellectual properties of patents, trademarks or
copyright, it imbues a substantial amount of economic value. Know-how and
confidential information, which constitute trade secrets, can be protected only
so long as the owner is able to keep them a secret and takes an action for
breach of confidence or contract against the unlawful
use of such information by others.[2] While there are several countries like the USA, Japan, China which have
codified the trade secret regime to broaden the measures of protection, several
others, including India, still rely on common law principles and other laws
pertaining to confidentiality to deal with the same.
Trade secrets are, no doubt, highly susceptible to leakages. Without a
well-defined legislation, protection of the same can prove to be an extremely
arduous task. Thus, in the course of this paper, we will not only be dealing
with the ways in which the regulatory authorities are presently handling cases
pertaining to trade secrets but will also go on to analyze laws from around the
world and provide suggestions regarding modifying the existing remedial methods
as well as introducing better, alternate ones.
II.
CONCEPT OF
INTELLECTUAL PROPERTY RIGHTS
The term ‘Intellectual Property’
has now been internationally recognized to include within its ambit patents,
industrial designs, copyrights, trademarks, know-how, and confidential information.[3] It refers to creations of the mind, such as inventions in all fields of
human behavior; literary and artistic works, designs, performances of performing artists, phonograms and broadcasts, scientific discoveries and symbols, names and images used in commerce.[4]
IPR, like any other property right, allows the creators or owners of
works to benefit from their own work or investment in a creation. These rights
are outlined in Article 27 of the Universal Declaration of Human Rights (hereinafter,
UDHR) which provides for the right to benefit from the protection of moral and
material interests resulting from authorship of scientific, literary or
artistic productions.[5] In simpler terms, these rights confer on individuals, enterprises or
other entities the right to exclude others from the use of their creations.
Such IPRs are broadly of six kinds,
namely, patent, trademark, copyright, plant varieties, industrial design and
geographical indication.
II.1. Patent
It is an exclusive right granted to an inventor by a country, permitting
the inventor to exclude others from making, using or selling its invention in
that country during the life of the patent. In India, The Indian Patent Act,
1970 governs the operation of this IPR. For instance, Indian Institute of Technology,
Wipro and Bharat Heavy Electrics Limited hold a number of patents for their
inventions.
II.2. Trademark
The Trade Marks Act, 1999 is the legislation governing trademarks in
India. Any word, sign, symbol or graphic that distinguishes one’s company,
goods or services from those of its competitors, serving as a badge of
originality, amounts to a trademark. It comprises of words, logos, images,
slogans, shapes and colors, or a combination of all of these. The logo of Intel
Corporation is a well-known mark.
II.3. Copyright
It is a right which the creator has over its fictional and
artistic works such as books, paintings, music, advertisements, computer
programs etc. The Copyright Act, 1957 is the law for this right in India.
II.4. Plant Varieties
The Protection of Plant Varieties and Farmers
Rights Act, 2001 governs the functioning of this IPR in India. This right mainly protects the existent plant varieties and encourages
the development of new ones. For instance, PepsiCo in 2016 has obtained
protection for two hybrid potato varieties.
II.5. Industrial Design
It protects the graphic design of a product and makes it attractive and
appealing, thereby, increasing its marketability. A design has to be novel and
original. The legislation commanding designs is the Designs Act, 2000. For
instance, Colgate Palmolive has obtained this IPR for its toothbrush designs.
II.6. Geographical Indication
It is a symbol used for products having a certain specific physical
origin which retain qualities and reputation due to that origin. Geographical
Indications of Goods (Registration and Protection) Act, 1999 regulates
geographical indications in India. Mysore Silk, for example, is protected under
this particular IPR.
Intellectual property of any form pertains to intangible incorporate
property and is of the nature of jus in re propria, i.e., the right of enjoyment, incident to
full ownership of property and is often used to denote the full ownership or
property itself.[6] The statutes conferring exclusive rights on the owner of any
intellectual property, actually confer the right to the owner to prevent its
competitors from commercially exploiting the respective rights to the detriment
of the owner.[7]
Certain salient features have been observed, after an analysis of the
various kinds of IPRs, which aid in discerning these IPRs from other property
rights. [8]
II.A. Territorial
Any intellectual property issued should be resolved by national laws. A
particular IPR is valid only in the country that grants it. In order to protect
a particular intellectual property in another country, protection has to be
sought separately under the relevant law in such country. For instance, Indian
registration of an intellectual property is valid only in India. It cannot be
imitated by a person residing in China, unless, protection for the same is
sought under Chinese law.
II.B. Exclusive right of the owner
Bestowing an exclusive right on the owner means any other entity apart
from the owner is prohibited from exercising the concerned right but with such
owner’s authorization. The creator or author of an intellectual property enjoys
rights inherent in his work to the exclusion of anybody else.
II.C. Assignable
Intellectual properties are protected as rights and thus, can be assigned
or licensed to another. It is possible to put a dichotomy between IPR and the
material object in which the work is embodied. Intellectual property can be
bought, sold, licensed, hired or attached.
II.D. Independence
Different IPRs subsist in the same kind of object but still retain their
independence. Most IPRs are likely to be embodied in such objects. For
instance, the ink of a pen can be registered for protection by one company,
whereas, the nib of the same pen can be registered for protection by another
company.
II.E. Subject to Public Policy
Intellectual property attempts to preserve and find adequate
reconciliation between two competing interests. On one hand, IPR holders
require adequate remuneration and recognition of their work and on the other
hand, consumers have to consume such work without much inconvenience or breach
of holder’s rights.
II.F. Divisibility (Fragmentation)
Several persons may have legally protected interests evolving from a
single original work without affecting the interest of other right holders on
that same item because of the nature of divisibility of intellectual property. This
nature is derived from intellectual property’s territorial feature. For example,
an inventor who registered his invention in Ethiopia can use the patent himself
in Ethiopia, license it to someone in Germany and assign it to another in
France.
IPR protection is absolutely necessary to allow innovators to apposite a
share of the benefits of their creative activities and to encourage them for further
innovation. As a result, more and more aspects should be brought under the
umbrella of intellectual property to ensure that no work of originality is
prone to plagiarism.
III.
WHAT ARE
TRADE SECRETS?
In a free market economy with tough competition, each producer desires to
obtain the confidential information of its rivals for having an upper hand. Trade secret is one of such confidential
information of a business or enterprise. The confidentiality of it is regarded
as a legal obligation enforceable by law.[9] A trade secret is any information that can be used in the operation of a
business or other enterprise and that is sufficiently valuable to afford an
actual or potential economic advantage over the others.[10] The Trade Related Aspects of IPR (hereinafter,
TRIPS) lays down three essential conditions which are to be fulfilled by any
information before it can be considered as undisclosed information (trade secret):
(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 confer some economic or
commercial advantage as a result of it being a secret and (iii) The information
must be the subject of reasonable steps taken by its owners to keep it a
secret.
While India does not have a dedicated legislation for the protection of
trade secrets, the Indian courts have, through various judgments, tried to
define the scope of trade secrets. In the case of American Express Bank Ltd. v. Ms. Priya Puri, the Delhi High Court
attempted to define trade secret as “…formulae,
technical know-how or a peculiar mode of business adopted by an employer which
is unknown to others.”[11]
The Uniform Trades Secret Act (hereinafter, UTSA), 1970 of the United
States of America lays down a distinct definition of trade secrets. Using the
definition provided by this Act as a guide, it can be deduced that a trade
secret must comprise of (1) information (2) that information should derive
independent economic value (3) it should not generally be known to, and not
readily ascertainable by proper means by other persons who can obtain economic
value from its disclosure or use (4) it should be novel and original, and (5) it
should be the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
III.1. Information
Any type of information, irrespective of the form it takes, may qualify
as a trade secret. It may consist of information relating to a formula,
pattern, device or other compilation of information that is used for a
considerable period of time in a business, or the technical information used in
the manufacturing process for the production of goods. It may relate to
marketing, export or sales strategies, or a method of book-keeping or other
business management routines or procedures, including software used for various
business purposes. Other examples of potential trade secrets may include
technical, scientific or financial information, such as business plans, list of
key customers, product specifications, product characteristics, proprietary
recipes and formulas.[12]
III.2. Economic value
In order to qualify as a trade secret, the concerned data should not
merely be a secret but should additionally derive some economic advantage from
it being a secret. In the case of Buffets
INC v. Klinke,[13] it was held that the recipes for traditional American dishes were not trade secrets because they were readily
ascertainable and did not have any independent economic value.
III.3. Not generally known
Matters in the public domain or general knowledge cannot qualify to be
trade secrets. In the case of Pressure Science
Inc. v. Kramer[14], the court listed six factors that it considered to be critical in
determining whether the disputed information is a trade secret: (i) The extent
to which the information was known outside the business; (ii) the extent to
which the secret was known by employees and others in the business; (iii) the
extent of the measures taken to safeguard the secrecy of the process; (iv) the
value of the information to the plaintiff and its competitors; (v) the amount
of effort or money extended by the plaintiff to develop its process; (vi) the
ease or difficulty with which the process could be properly duplicated or
acquired.
III.4. Novel or original
General information which is readily available cannot be considered to be
novel or original information. A trade secret must contain elements that are
unique and innovative and not generally known or used in that particular trade.
It must have been developed independently by using one’s own creative mind.
III.5. Reasonable efforts required to
maintain secrecy
The owner of a trade secret should take all the requisite efforts to
maintain secrecy which are rational under the circumstances. Practicable
endeavours like notifying the employees of the existence of a trade secret, the
controlled disclosure of information to
employees on a “need to know” basis are considered enough by the courts to
constitute ‘reasonable effort’. Courts also generally consider a non-disclosure
agreement (hereinafter, NDA) to constitute a reasonable effort to protect the
secrecy of a trade secret.[15]
Upon analysis of the definitions of trade secret and IPRs it can be
certainly concluded that since trade secret is also a creation of the
intellect, involving innovation and originality and possessing features of IPRs,
the same qualifies to be one of its domains. Trade secret is also essentially
territorial; it gives an exclusive right to the owner; is assignable and can be
licensed if the creator considers it to be fit; is subject to public policy and
can retain its independence when combined with other IPRs. For instance, the
recipe of Kentucky Fried Chicken is a trade secret, while its letters “KFC” in
red is trademarked.
Hence, trade secrets also need protection from commercial exploitation by
competitors as is granted to the other IPRs, while also having a right to
benefit from the protection mentioned in Article 27 of the UDHR.[16]
IV.
STATUS QUO OF
TRADE SECRETS IN INDIA
Though trade secrets qualify to be an IPR, the protection of the same in
India is gravely inadequate and unsatisfactory. Trade secrets can prove to be
the heart and soul of a business. However, the risks of exposure of the same
are also extremely high. As a result, in contrast to the current scenario,
stricter measures of safeguarding these secrets should be enacted to ensure
company growth, innovation and commercial ethics.
India has no distinct law for the protection of trade secrets. Instead,
the same is brought under the ambit of contractual law or common law for the
purpose of enforceability. India, in the 1989 General Agreement on Tariffs and
Trade (hereinafter, GATT) discussion paper clearly set out its stance on trade
secrets, stating that, these cannot be considered to be IPR.[17] It enunciated that the fundamental basis of an IPR is its disclosure,
publication and registration, while the fundamental basis of a trade secret is
its secrecy and confidentiality. It further asserted that the observance and
enforcement of secrecy and confidentiality should be governed by contractual
obligations and the provisions of appropriate Civil Law and not by intellectual
property law. However, in 2008, the Department of Science and Technology
released a draft legislation titled, National Innovation Act. Though this Act does not deal with trade
secrets per se, Chapter VI of the Act
mentions in detail, provisions regarding confidentiality and confidential
information as well as the concomitant remedies and offences.[18] On May 12, 2016, India also approved the National IPR Policy consisting
of seven main objectives. One of the objectives pertain to the legislative and
legal framework, within which, protection of trade secrets is recognized as one
of the ways of achieving the concerned objective.[19]
India primarily turns to equitable law and common law for the protection
of trade secrets with major reliance on the principles laid down in the Saltman Engineering case.[20] On the analysis of the cases decided in respect of this intellectual
property, there are four main provisions that the Indian courts turn to in
instances of its infringement.
IV.1. Breach of confidence
Breach of confidence can be described as a civil remedy affording
protection against the unauthorized disclosure or use of information which is
of a confidential nature and which has been entrusted to a person in
circumstances which impose an obligation to respect its confidentiality.[21] Finding its origins in the right to privacy, confidentiality is
perceived as a tort by the Indian courts; a legal obligation. A landmark
judgment in this respect was ZeeTelefilms
Ltd.& anr. v. Sundial Communications
Private Limited & Ors. The Bombay
High Court held that the law of breach of confidence is different from that of
the law of copyright as the former also includes in its ambit an unpublished
idea or concept that may have simply been disclosed in a relationship of trust, ie., even if the
obligation to maintain it was not express but merely implied.[22] The concept of confidentiality extends to sensitive data of a particular
firm or business, as well.[23]
The Springboard Doctrine has also been adopted by the Indian judiciary in
such cases. The doctrine enunciates that a person who has received any
information in confidence cannot use it as a springboard for activities that
are deleterious to the original owner of the information.[24] In Inphase Power Technologies v.
Abb India Ltd., the Karnataka High Court applied the Springboard doctrine and
passed an order of injunction against an ex-employee from using the information
in his possession to the detriment of his ex-employer.[25]
IV.2. Principle of equity
The principle of equity is a body of legal doctrines developed for the
purpose of enlarging an existent immutable system of law. In cases where the
strict application of common law results in injustice or inappropriate remedy, the
principle of equity is implemented to mitigate the rigors of the drafted laws
and Acts.[26] Under this principle, a person who has obtained any confidential
information or knowledge of any trade secret is not to take unfair advantage of
it. The Delhi High Court, in the case of John
Richard Brady v. Chemical Process Equipments P. Ltd., laid down that it was
in the interest of justice to restrain the respondent from using the know-how,
specifications, drawings and other technical information regarding the
plaintiff’s fodder production unit which was entrusted to them under express
condition of strict confidentiality.[27]
IV.3. Confidentiality clauses in
agreements
A confidentiality clause, also known as the non-disclosure clause or secrecy agreements, are legal agreements between
parties specifying information that one or both of the parties consider
confidential and prohibiting the other party from disclosing it.[28] Breaching of a confidentiality clause can cause
irreparable damage to the non-breaching party. Thus, apart from the monetary relief, the non-breaching party is entitled to an injunction (in case of anticipatory breach) or any other equitable
relief for the enforcement of such obligation. The employee breaching the
confidentiality agreement can also be subjected to dismissal as well as be
forced to return all the company information or product in its possession. In
the case of Danieli Corus BV v. Steel Authority of India, Delhi High Court restrained the respondent
or its agents from disclosing the proprietary information to a third party in
any manner, thus, preventing the breach of the confidentiality agreement.[29] It also reiterated the
settled law that a party cannot challenge the confidentiality of any
information mentioned in a contract at a later stage having taken the benefit
of the same under the contract.
IV.4. Non-compete agreement
Non-competition agreements are restrictive contracts
between employers and employees that prohibit workers from revealing
proprietary information about the company to competitors or other outsiders or forbid
employees from competing with their ex-employer for a certain duration, post
their exit from the company.[30] Often, it is the latter, whereby the employee is
prohibited from entering into professions that are in competition with the
current employer, either for a particular duration of time or in a particular
geographical region. This type of agreement is also called a ‘covenant not to
compete’ or a ‘restrictive covenant’.[31] The basic idea behind such agreements is that there is
a high possibility of the employee gaining an undue competitive advantage over
the former employer by exploiting the company’s confidential information such
as trade secrets, upcoming products, clients’ list etc.
The legality of non-compete agreements varies from state
to state. It also depends on the restrictive nature of the agreement as well
the reasonability of the limitations. The question of the validity of these
agreements has been examined from time to time by the Indian courts. One
consistent principle that has been held in all these cases is that the non-compete
covenants are valid only until the lifetime of the contract and automatically
end on the termination or expiry of such contract. By no means can the
restraint be extended beyond the term of the contract. Though Section 27 of the
Indian Contract Act classifies all agreements in restraint of trade as void,
the exception to the same paves way for non-compete agreements.[32] In the case of Niranjan Shankar
Golikari v. the Century Spinning, the Supreme Court held that a restraint,
whether general or partial if reasonably necessary for protecting the covenantee,
must prevail unless some specific ground
of public policy can be clearly established against it.[33] Thus, non-compete agreements are good in law if applied reasonably only
for the duration of the contract between the parties.
V.
INTERNATIONAL
LEGAL FRAMEWORK
The safeguarding of trade secrets has been recognized in a number of
conventions and legislations around the globe. A few important ones among them have been listed below.
V.1. North American Free Trade
Agreement (hereinafter, NAFTA)
The NAFTA, which came into force in January 1994, is the first
international comprehensive multilateral agreement on protection of IPRs. It
recognises the need to provide for the protection of trade secrets.[34] Every party to this agreement is bound to devise legal means to prevent
unauthorized disclosure and use of trade secrets. Due to NAFTA, several
countries have incorporated legal sanctions in their domestic laws in case of
disclosure of confidential information.
V.2. TRIPS
TRIPS is an international legal agreement between all
the member nations of the World Trade Organization. TRIPS does not directly
refer to ‘trade secrets’ but mentions the term ‘Undisclosed Information’. All members are expected to protect undisclosed information from
commercial exploitation under Clause 2 of Article 39 of TRIPS and under clause
3, data or information submitted to Government for regulatory or other
approvals have to be protected from leakage or theft by third parties.[35] Notably, while India is a signatory to the TRIPS and has amended its
intellectual property laws in line with the convention, it did not afford any
special protection to trade secrets as envisaged under Article 39.
V.3. United States of America
At the state level, the protection of trade secrets is
governed by the UTSA, which provides for a well-defined meaning of trade
secrets.[36] If a trade secret is misappropriated, the injured
person may seek injunctive relief and damages under this Act. In 2016, the Defend Trade Secrets Act (hereinafter, DTSA) was
also enacted which is a federal law that allows an owner of a trade
secret to sue in a federal court in case of misappropriation of its trade secrets.[37] It creates a federal, private, civil cause of action
for trade secret misappropriation.
V.4. United Kingdom (hereinafter, UK)
All countries of the European Union (hereinafter, EU)
were required to adopt the EU trade secrets directive in 2016 and make laws in
consonance with it. In June 2018, the
UK’s Trade Secrets (Enforcement, etc.) Regulations 2018 came into force.[38] These regulations are a result of the EU Directives,
2016 on the protection of undisclosed know-how and business information against
their unlawful acquisition, use and disclosure[39] It provides for civil remedies of injunctions and
damages. Prior to this, there was no specialized law for the protection of
trade secrets in the UK and they were protected by the law of confidence
derived from principles of equity and common law.
V.5. Japan
Trade secrets in Japan are protected under the Unfair
Competition Prevention Law. According to this law, trade secrets include any
“technical or business” information that has commercial value, is not in the
public domain and which has been “administered” as a trade secret.[40] Infringement occurs when a person procures a trade
secret by theft, fraud or extortion or when there is an unauthorized use or
disclosure of a lawfully acquired trade secret for unfair competition.[41] An injured party may seek injunctive relief and
damages. It also provides for criminal sanction up to five years’ imprisonment
and fine.
V.6. China
Chinese ‘Anti-unfair competition law’ became effective
on December 1, 1993.[42] This is China’s first trade secret law. The term trade
secrets is defined, under this law, as technical and management information
that is unknown to public, can bring economic benefits, is of practical value
and for which the rightful party has adopted measures to maintain its confidentiality.[43] The injured party may seek civil or in grave cases,
criminal remedy as well.
V.7. Germany
In compliance with the EU directives of 2016, Germany has
introduced a new law, ‘The Trade Secrets Act’ in March 2019. In Germany the
term trade secrets include both technical know-how as well as business
information. The remedy of pecuniary
compensation and injunctions is available to the aggrieved parties.
VI.
VIABLE CHANGES
IN INDIA’S TRADE SECRET
PROTECTION
APPARATUS
The state of protection of trade secrets in India is comprehensibly not
up to the mark. Apart from being scanty, it has several loopholes, giving way
to easy escape of the offenders infringing this particular intellectual
property. In order to keep the creative minds working and innovative ideas
flowing, stringent measures of safeguarding this right have to be developed.
VI.1. Legislative framework
The first and the foremost step that our country should take in this
direction is of bringing in a pro-active
legislation under a ‘Sui Generis’ system as provided for under Art.10bis of
the Paris Convention[44] and Article 39(2) and 39(3) of TRIPS[45], both of which India is a signatory to. Sui generis is a Latin term meaning “a special kind”. In IPRs, the term
refers to a special form of protection regime outside the known framework. A
sui generis law would give a uniform definition of trade secrets, what would
amount to their infringement, give a standard format of NDAs, lay down remedies
of both civil and criminal nature in case of their misappropriation, so on and
so forth, which would go a long way in securing the interests of domestic as
well as foreign traders who are willing to make investments in India. Certain
provisions from the legislations mentioned in the previous section can be
borrowed and incorporated in ours, in order to ensure that the laws made cover all
aspect of trade secrets.
VI.1.1. A distinct forum
A proper forum should be established to hear only the cases that pertain to
infringement of trade secrets. Companies and individuals, both, should have
equal rights to file civil or criminal suites in their respective capacities. In
addition to this, as is the provision in the UTSA, the court or the concerned
forum should take necessary steps to ensure that the trade secret is protected
during any legal action or proceedings being conducted in its regard.[46]
VI.1.2. Statute of limitation
A provision in the statute of limitations should be operative, limiting
the time duration within which the plaintiff can file a suit upon the discovery
of the leakage or theft of the trade secret to avoid any unnecessary delays and
ensure speedy justice.
VI.2. Federalization
The methods of protection of trade secrets, along with the forum to seek
remedy for the same, should be federalized. Apart from the central government,
every state should have a mechanism to deal with such infringements, as is the
provision in the DTSA.[47] This will ensure the establishment of a comprehensive redressal apparatus
at all stages and leave no scope for any injustice.
VI.3. Punishment/Remedies
Proper and adequate punishment should be prescribed for the theft of such
trade secrets. These could range from civil remedies of damages to criminal
punishments of imprisonment or fine or both. Criminal liability should be
invoked in cases of specific trade secrets’ infringement where a serious loss
has been caused to the owner. The provisions of criminal breach of trust,
cheating and fraud, as defined in the Indian Penal Code should also be made
applicable in such cases.[48] In addition to these, the person guilty of such an offence should be
proscribed from working in that particular field of occupation, concerning the
trade secret, for a specific period of time, sufficient enough for the company
that is harmed to recover its losses due to such a theft.
VI.4. Seizure
Another provision that can be incorporated in a legislation for trade
secrets is that of ‘seizure’. Any individual or company whose trade secrets are
stolen should be entitled to seize that property containing the trade secret,
so as to prevent dissemination and propagation of it,[49] in case of extraordinary circumstances. Seizure orders can be granted by
the court depending on the facts of the case, which may include a search of the
defendant’s premises in order to obtain evidence to establish the theft of
trade secrets at trial or the precautionary impoundment of articles that
include misused trade secrets, or the products resulting from its use or
misuse. [50]
VI.5. Protection of whistle-blowers
The whistle-blowers, who reveal the theft or disclosure of trade secrets
to either the attorney or any other person, in confidence and in good faith to
report the violation of the right, should be provided with absolute immunity.
The case of Christian v. Lannett Co., provides welcoming guidance regarding the circumstances in which the
whistle-blower safe harbor will apply. In this particular case, it was held
that immunity is to be provided for the disclosure of a trade secret “in confidence…to an attorney…solely for the
purpose of reporting or investigating a suspected violation of law”, as
according to the DTSA.[51]
VI.6. Removal from market
As mentioned in the ‘Directives on the Protection of Trade Secrets’,
adopted by the EU in 2016, the commodities that have been manufactured on the
basis of the leaked or stolen trade secret can be completely removed from the
competitive market to do justice to the plaintiff.[52]
VI.7. Protection against reverse
engineering
One of the simplest and most convenient ways of discovering a trade
secret of any particular good is through reverse engineering. It is the method of disassembling and examining or
analyzing in detail, a product or device, to discover the concepts involved in
its manufacture, usually in order to produce something similar.[53] Often, reverse engineering is seen
as a fair and legal activity, such as for deconstructing software programs or
for military purposes. However, presently there are no provisions for tackling illegal
and harmful reverse engineering in any legislation around the world. In order
to avoid the unlawful use of this activity, provisions should be made for
seeking prior permission from the inventor of the product to reverse engineer
it. Such permission should be granted solely on the ground that the invention
would be used only as a base model and that it would be further developed and
innovated according to the creativity of the reverse engineer. In addition to
this, a particular percentage for the usage of the original product, in the
commodity to be created after developing it, should also be fixed.
VI.8.
Company’s role
A couple of provisions regarding
safeguards on the part of the company itself should also be integrated into any
legislation for the protection of trade secrets. The Information Technology
branch of every company should be trained to be capable of protecting highly
sensitive trade secrets with the aid of firewalls, encryption, monitoring
access to information etc. Certain rules should be formulated for the use of
private storage media, as well. Confidential information can also be disposed of
by shredding or burning once it has been transmitted to the required personnel,
in order to ensure that it does not come in contact of any unauthorized person.
Companies should also conduct exit interviews, whereby, the departing employees
should be reminded of any NDA that they were made to sign and to emphasis on
the confidentiality obligations. They should also be asked to return any or all
materials belonging to the company including anything, tangible or intangible,
pertaining to the trade secret of the company.
VI.9.
Accommodation in existing IPR Protection regime
This particular intellectual
property can also be included in the existing IPR Protection regime till the
time a well-defined law is independently formulated for it.
VI.9.1.
Copyright
Trade secrets can be best
accommodated in the ambit of Copyright. Creations such as distinct food
recipes, special chemical formulas for cleaning products, unique process for
making computer programs etc. can qualify as “artistic works” and be included
under the Indian Copyright Act, 1957. Such an inclusion would not only provide complete
protection to the inventor of the trade secret for his lifetime, but also for
60 years, thereafter. It was in 1980, that the American
Bar Association Committee on Trade Secrets and Interference with Contracts
considered for the first time the propriety of protecting trade secrets or
confidential materials via copyright. The committee viewed copyright protection
as a “backup or complement” to laws prohibiting theft or misappropriation of
trade secrets.[54] Indian courts have attempted to protect trade secrets as copyrights in a
few cases, one of them being Puneet Industrial Controls Pvt.
Ltd. v. Classic Electronics. In this pertinent case, the plaintiff who was engaged in the
manufacturing and selling of electric goods, alleged that his relative used his
confidential information and started his own manufacturing unit, producing the
same products as the plaintiff. The court held that the plaintiff had copyright
over the information and restrained the defendants from imitating the products
of the plaintiff.[55]
VI.9.2.
Patents
Apart from Copyright, trade secrets
can also be safeguarded by registering them as Patents. In order for a trade
secret to be granted a Patent, (i) it
must be a new product or process, (ii) that product or process must be
non-obvious (iii) that product or process must be useful (iv) that product or
process must be capable of industrial application. Patents would grant
these secrets absolute protection for a time period of 20 years, which can be
extended thereafter, if needed. Any leakage or theft of the same can also be
dealt with in a better way as The Indian Patent Act, 1970 is already operating to
deal with any patent infringements.
VII.
CONCLUSION
Steve Jobs famously quoted Picasso as saying, “good artists copy; great artists steal”. In the present scenario, it is extremely important that India takes steps
to implement a sui generis legislation for protection of trade secrets from
such “great artists”. For decades, creators of innovative ideas pertaining to
trade have been under the constant fear of its leakage and theft with little to
no remedies at their disposal in such cases. Being a fast growing economy,
India cannot afford such a fear lurking over the heads of the inventors of the
country, further resulting in arrested economic and technological development.
A creative mind needs incentive and assurance of its safety to keep on
functioning and delivering novel ideas from time to time. This is one field
that India will have to work on expeditiously to avoid a stunted growth.
Protection of trade secrets would go a long way in securing the interest
of the foreign investors in the country, ensuring the continuous inflow of
foreign investment which the country is in dire need of. The evil of commercial
espionage needs to be dealt with strictly and severe liability has to be placed
on its defaulters. Trade secrets, with no limitations on the time period of its
protection and no need for its registration, is in reality better than any
other existent IPRs as it grants endless protection to the invention. If not
better then, at least, the means of safeguarding it should be brought at par
with the other IPRs. Indeed, the protection of trade secrets is not plain-sailing
but is an absolute necessity as it not only benefits the country as a whole but
also individual businesses ranging from big, global ones to the Small and Medium
Enterprises, who currently are on a dead end when it comes to the violation of
this domain of IPR.
This research has demonstrated the severe dearth of shielding mechanisms
for trade secrets in India and the disadvantages that arise out of it. Though
there can be several possible ways through which the government can bring the
offenders to justice, the authors have attempted to shortlist certain
fundamental mechanisms of strengthening this deficient field of protection of
trade secrets after making a thorough analysis of the status quo, the possible
consequences due to the insufficiency and provisions in legislations around the
globe.
[1] Dr. Sudhir Ravindran, Real Property vs.
Intellectual Property (Sep.20,2019,3:45 PM), https://www.altacit.com/wp-content/uploads/2015/03/12-REAL-PROPERTY-vs-INTELLECTUAL-PROPERTY.pdf.
[2] 4, P. Narayanan, Intellectual
Property Law 4 (3rd ed. 2001).
[3] Id.
[6]
Encyclopedic, Legal Definition and
Related Resources of Jus in re propria, Legal Dictionaries of the
Encyclopedia of Law Project (Sep. 15,
2019, 11:22 PM), https://legaldictionary.lawin.org/jus-in-re-propria/.
[7] Narayanan, supra,
2.
[8]BalewMersha, Concept, Scope and Nature of IPR,
Abyssinia law (Oct. 24, 2019, 9:43 AM), https://www.abyssinialaw.com/online-resources/study-on-line/item/467-concept-scope-and-nature-of-intellectual-property-rights.
[9] V.K. Ahuja, The law relating to IPR in India 139
(2nd ed. 2015).
[10] V.K. Ahuja, The Law of IPR:In Prospect And
Retrospect 272 (2001).
[12] WIPO, Basics of Trade Secrets, Trade Secrets
(Oct. 29, 2019, 5:00 PM), http://www.wipo.int/export/sites/www/sme/en/documents/pdf/ip_panorama_4_learning_points.pdf.
[13] Buffets, Inc v Klinke, 73 F. 3d 965, 37 (9th
Cir. 1996).
[14] Pressure science Inc. v. Kramer, 413 F. Supp.
618, 193 (D. Conn. 1976).
[15] IDS Life Ins. Co. v. Sun America, Inc.,103 F.
3d 524 (7th Cir. 1996).
[16] Supra note 5.
[17] Permanent Mission of India, Standards and Principles
concerning the availability scope and use of trade-related intellectual
property rights, ¶46, 10 July, 1989, MTN.GNG/NG11/W/37.
[19] The National
IPR Policy, Objective 3.8.4 (2016).
[22] Zee Telefilms Ltd v. Sundial Communications Pvt
Ltd.,5. BomCR 370, 404 (2003).
[23] Bombay Dyeing and Manufacturing Co. Ltd v. Singh.,
SCCOnLineBom 1243
(2010).
[26]V. Subramanium, Principles of natural justice and
principles of equity, (Nov. 1, 2019, 4:45 PM),
http://www.allbankingsolutions.com/Articles/Articles-VS-Principles-of-Natural-Justice.htm.
[27] Brady v. Chemical Process Equipments P. Ltd., AIR372
(Del.1987).
[28] Rebecca K Myers, Confidentiality, Non disclosure
and Secrecy Agreements, Lexis Practice Advisor Journal, (Nov. 2, 2019, 3:00
PM), https://www.lexisnexis.com/lexis-practice-advisor/the-journal/b/lpa/archive/2015/11/30/confidentiality-nondisclosure-and-secrecy-agreements.aspx.
[30] Non-Competition Agreements, (Nov. 14, 2019,
2:21 PM), https://www.inc.com/encyclopedia/non-competition-agreements.html.
[31] Will Kenton, Non-Compete Agreement, Law and
Regulations (Nov. 14, 2019, 4:02 PM), https://www.investopedia.com/terms/n/noncompete-agreement.asp.
[34] The North American
Free Trade Agreement (1994).
[35] The Trade related aspects of IPR, ar.39(2),
ar.39(3) (1994).
[36] The Uniform Trade Secrets Act, §1 sub.cl.4 (1979).
[37] The Defend Trade Secrets Act, §2 (2016).
[40] The Unfair Competition
Prevention Act, art.2 sub.cl.6 (1993).
[41] The Unfair Competition
Prevention Act, ar.2 cl.1
sub.cl.iv (1993).
[42] The Anti-unfair
competition law, (1993).
[43] Id. at ar.10 (1993).
[45] Supra note 35.
[47] Supra note 37.
[48] The Indian Penal Code 1860 §406, §420.
[49] Supra note 37 at §2 cl.b sub.cl.2.
[52] Directives on the Protection of Trade Secrets,
(2016).
[53] Reverse engineer, Merriam Webster (December.
11, 2019, 3:47 PM), https://www.merriam-webster.com/dictionary/reverse%20engineer.
[54] Section Of Patent, Trademark And Copyright Law,
Committee Reports, A.B.A 100, 218 (1980).