Author: Vijayalakshmi K.V., Aakson Institute of Management Studies
Trade secrets include formulas, practices, processes, designs, instruments, patterns, or compendiums of information that have essential profitable value because they are n’t generally known or readily ascertainable by others, and which their proprietor takes reasonable measures to keep secret.
Intellectual property law gives the proprietor of a trade secret the right to circumscribe others from telling it. In some countries, trade secrets are appertained to as non public information.
Description
The precise language by which a trade secret is defined varies by governance, as do the particular types of information that are subject to trade secret protection.
Three factors are common to all similar delineations A trade secret is information that
• is not generally known to the public;
• confers profitable benefit on its holder because the information is n’t intimately known; and
• where the holder makes reasonable sweats to maintain its secretiveness. In transnational law, these three factors define a trade secret under composition 39 of the Agreement on
Trade- Related Aspects of Intellectual Property Rights, generally appertained to as the passages Agreement. also, in the United States Economic Espionage Act of 1996,” A trade secret, as defined under 18 U.S.C.§ 1839( 3)( A),( B)( 1996), has three corridor
( 1) information;
( 2) reasonable measures taken to cover the information; and
( 3) which derives independent profitable value from not being intimately known.”( 3) Value Trade secrets are an important, but unnoticeable element of a company’s intellectual property( IP). Their donation to a company’s value, measured as its request capitalization, can be major. Being unnoticeable, that donation is hard to measure. Still, exploration shows that changes in trade secrets laws affect business spending on R&D and patents. This exploration provides circular substantiation of the value of trade secretiveness.
Protection In discrepancy to registered intellectual property, trade secrets are, by description, not bared to the world at large. rather, possessors of trade secrets seek to cover trade secret information from challengers by constituting special procedures for handling it, as well as enforcing both technological and legal security measures.
The most common reason for trade secret controversies to arise is when former workers of trade secret- bearing companies leave to work for a contender and are suspected of taking or using precious non-public information belonging to their former employer. Legal protections include non-disclosure agreements( NDAs), and work- for- hire and non-compete clauses. In other words, in exchange for an occasion to be employed by the holder of secrets, an hand may agree to not reveal their prospective employer’s personal information, to surrender or assign to their employer power rights to intellectual work and work- products produced during the course( or as a condition) of employment, and to not work for a contender for a given period of time( occasionally within a given geographic region).
Violating the agreement generally carries the possibility of heavy fiscal penalties, therefore disincentivizing the revealing of trade secrets. Trade secret information can be defended through legal action including an instruction precluding breaches of confidentiality, financial damages, and, in some cases, corrective damages and attorneys’ freights too.
In extraordinary circumstances, an partner parte seizure under the Defend Trade Secrets Act (DTSA) also allows for the court to seize property to help the propagation or dispersion of the trade secret still, proving a breach of an NDA by a former stakeholder who’s fairly working for a contender or prevailing in a action for violating anon-compete clause can be veritably delicate. A holder of a trade secret may also bear analogous agreements from other parties, similar as merchandisers, agents, and board members. As a company can cover its non-public information through NDA, work- for- hire, and non-compete contracts with its stakeholders ( within the constraints of employment law, including only restraint that’s reasonable in geographic- and time- compass), these defensive contractual measures effectively produce a monopoly on secret information that does n’t expire as would a patent or brand.
The lack of formal protection associated with registered intellectual property rights, still, means that a third party not bound by a inked agreement is n’t averted from singly duplicating and using the secret information once it’s discovered, similar as through rear engineering. Green Chartreuse liqueur defended by non public information of the constituents thus, trade secrets similar as secret formulae are frequently defended by confining the crucial information to a many trusted individualities.
Notorious exemplifications of products defended by trade secrets are Chartreuse liqueur and Coca- Cola. Because protection of trade secrets can, in principle, extend indefinitely, it may give an advantage over patent protection and other registered intellectual property rights, which last for a limited duration. For illustration, the Coca- Cola company has no patent for the formula of Coca- Cola and has been effective in guarding it for numerous further times than the 20 times of protection that a patent would have handed. In fact, Coca- Cola refused to reveal its trade secret under at least two judges’ orders.
Trade Secret Case Law: Steer Engineering Pvt. Ltd. v. Glaxosmithkline Consumer & Ors.
Key Issue
The Appellant claimed that its test results and databases are protected under Section 2(o) of the Copyright Act, 1957. The basic allegation is that the patent application filed by some of the Respondents contained ‘appellant’s intellectual property and confidential information. The appellant has quoted what is stated in the patent application and the key claims made in the patent application…( ) Thus the case of the Appellant is that the acts of 1st to 3rd Respondents of using, storing and reproducing the test results of the Appellant amounts to infringement of its copyright. Secondly, the confidential information that is proprietary to the plaintiff is reproduced in the impugned patent application’ (para 22).
Judgment
The Court noted that the Appellant had not produced before the Trial Court the original work (proprietary test databases and test results) in respect of which copyright is claimed. Only a redacted version of alleged original work was produced. This attracted adverse inference (para 23).
As on confidential information, the Court was not prima facie convinced as to whether the respective information fell under the clause of confidential information. The Court held that the ‘Appellant was required to clearly identify the information relied upon by it and establish that, prima facie, the said information is of a confidential nature’ (para 30).
The Court also took note of the delay on the part of the Appellant in filing the suit (when a discretionary equitable remedy is claimed). The High Court also noted that the scope of interference of an Appellate Court ‘against an order refusing to grant discretionary and equitable relief of temporary injunction is limited’ (para 32).
Analysis
I do not think that the Copyright Law will help the Appellant. Copyright Law protects expression and not the information / contents. As far as protection of database is concerned, the Copyright Law protects arrangement, presentation, selection etc of the database.
The EU Directive on Databases (96/9) offers copyright and sui generis protection for databases. While Copyright Law protects selection or arrangement of contents which constitutes author’s own intellectual creation, sui generis right protects the contents of the database (Arts 3 and 7). India doesn’t offer a sui generis protection for databases (unlike the European Union). Indian Copyright Law can only be invoked as far as expression is concerned (and definitely not with regard to the contents of the database). This doesn’t help the case of the Appellant.
On protection of confidential information, the Appellant may have a case. It is an issue involving law and facts. Confidential information, otherwise known as trade secret, is an area of law which is not explored much in India. Art 39 of the TRIPS, the relevant article, provides as follows:
Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
(Principles of Unfair Competition Law should be read along with trade secrets (Art 39.1 of TRIPS). India, unfortunately, doesn’t have a robust legal framework on ‘Unfair Competition’ (which is not Competition Law / Antitrust Law). We, however, do have principles of tort law and equity which deal with unfair competition. But this area of law has not received the deserved attention.)
Trade secrets is a mixed bag. It has its pros and cons. As to appreciate the finer aspects associated with trade secrets Law, consider the following: In case of patents, the patentee enjoys exclusivity. That is not the case with trade secrets. Secrecy and exclusivity associated with trade secrets law are factual aspects (and not necessarily legally warranted). The protection offered by trade secrets law is available only against wrongful appropriation. Since facts play a major role in adjudication, cases involving trade secrets may end up as ‘hard cases.
Broadly speaking, trade secrets can be protected in two ways (other than Common Law principles): statutory trade secret protection and contractual trade secret protection. Statutory trade secret protection may generally be retrospective in nature i.e addressing a violation which has already happened. On the other hand, contractual trade secret protection is generally prospective in nature i.e. to preclude violation. Considering that India doesn’t have a robust statutory framework for protection of trade secrets, the importance of contractual trade secret protection cannot be overemphasized.
Any case involving trade secrets, like the instant one, generally involves three issues:
Is the information a trade secret?
Has the information been misappropriated?
What are the remedies?
The instant Karnataka High Court judgment doesn’t deliberate upon the above-mentioned three aspects. Plausibly, they were not raised before the Court. It may be the case that the Appellant relied too much on Copyright Law (which is conceptually incongruent and therefore, unhelpful).
Conclusion
Summary A trade secret is confidential, commercially valuable information that provides a company with a competitive advantage, such as customer lists, methods of production, marketing strategies, pricing information, and chemical formulae.
FAQ’s
1. What is a trade secret?
Trade secrets are intellectual property (IP) rights on confidential information which may be sold or licensed. In general, to qualify as a trade secret, the information must be:
commercially valuable because it is secret,
be known only to a limited group of persons, and
be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.
The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.
2. What kind of information is protected by trade secrets?
In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret. Trade secrets encompass both technical information, such as information concerning manufacturing processes, experimental research data, software algorithms and commercial information such as distribution methods, list of suppliers and clients, and advertising strategies.
A trade secret may be also made up of a combination of elements, each of which by itself is in the public domain, but where the combination, which is kept secret, provides a competitive advantage.
Other examples of information that may be protected by trade secrets include financial information, formulas and recipes and source codes.
3. What kind of protection does a trade secret offer?
Depending on the legal system, the legal protection of trade secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.
While a final determination of whether trade secret protection is violated or not depends on the circumstances of each individual case, in general, unfair practices in respect of secret information include breach of contract breach of confidence and industrial or commercial espionage.
A trade secret owner, however, cannot stop others from using the same technical or commercial information, if they acquired or developed such information independently by themselves through their own R&D, reverse engineering or marketing analysis, etc. Since trade secrets are not made public, unlike patents, they do not provide “defensive” protection, as being prior art. For example, if a specific process of producing Compound X has been protected by a trade secret, someone else can obtain a patent or a utility model on the same invention, if the inventor arrived at that invention independently.
