Trade secrets refer to confidential information that provides a competitive advantage to a business. Trade secrets can include a wide range of information, such as formulas, processes, techniques, designs, customer lists and even recipes. One example of such trade secret is Google’s well keep secret algorithm of its search engine. Unlike intellectual property, trade secrets are not protected through registration with a government agency, since the same would require information to be in public domain and as the name suggests trade secrets are secret.
In India legal action against theft or misuse of trade secret is primarily based on breach of confidence, which ineffect is a breach of contarct. The following discussion aids in understanding the various aspects of trade secret and it’s protection in India.
According to Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), to qualify as a trade secret the information must be:
a. Commercially valuable
b. Be known to only limited group of people
c. Be subject to reasonable steps taken by the righful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.
Difference between intellectual property and trade secrets:
While Intellectual property (IP) and trade secrets are both types of legal protections that are designed to safeguard the valuable assets of a business and share some similarities, there are some key differences between the two.
Intellectual property refers to a broad category of legal rights that protect creations of the human intellect, such as inventions, literary and artistic works, and symbols, names and images used in commerce. Some of the most common types of intellectual property include patents, trademarks, copyrights, and trade secrets.
Trade secrets, on the other hand protect confidential business information that provides a competitive advantage. This can include things like customer lists, marketing strategies, manufacturing processes, and other sensitive information that a company does not want to be disclosed to competitors or the public.
One of the key differences between IP and trade secrets is that IP must be publicly disclosed in order to be protected. For example, in order to obtain a patent or trademark, an inventor or business must file an application with the relevant government agency that discloses the details of their invention or branding. Trade secrets, on the other hand, are protected by keeping the information confidential.
Another key difference is that while IP protections are time-limited (e.g., patents expire after a certain number of years), trade secret protection can potentially last indefinitely, as long as the information remains confidential. Hence although intellectual property and trade secrets are both designed to protect valuable business assets, trade secrets protect confidential business information, and are enforced through different laws rather than registration.
Steps for preventing theft of trade secrets:
Protecting trade secrets is an important aspect of running a successful business and preventing theft is a major concern for enterprises. Theft of trade secrets is a serious crime and companies can take legal action to protect their trade secrets, and individuals found guilty of stealing trade secrets can face significant legal consequences.
Here are some steps that companies can take to protect their trade secrets:
Identify trade secrets: The first step in protecting trade secrets is to identify what information constitutes a trade secret. This can include information related to product development, marketing strategies, customer lists, and other confidential information. Once identified, the information should be classified and treated as confidential.
Limit access and security measures: Limit access to trade secrets by providing access only to those who have a need to know the information. Technical security measures can include password protection, encryption, and firewalls to protect electronic trade secrets, also installing physical security measures is important which can include restricted access to areas where trade secrets are stored, locks and alarms, and security cameras.
Agreements: Nondisclosure agreements (NDAs) and confidentiality clauses can be used to ensure that employees, contractors, and other third parties who have access to trade secrets are legally bound to keep the information confidential. A standard contract is not enough to cover confidential subject matter, or with access to sensitive information, it will need more specific clauses covering the potential threat.
Governing Laws in India:
Civil Suit for breach of contract:
A breach of contract for trade secrets occurs when one party to a contract fails to uphold their obligations related to the protection and confidentiality of the trade secrets involved in the contract.
To prevent a breach of contract for trade secrets, parties may include provisions in the contract that require the recipient of the trade secret information to keep it confidential and use it only for the purposes stated in the contract.
They may also include provisions for the return or destruction of the trade secret information upon termination of the contract.
If a breach of contract for trade secrets occurs, the injured party can take legal action to seek damages. This may include monetary compensation for any losses resulting from the breach, as well as injunctive relief to prevent further disclosure or use of the trade secret information.
It’s important to note that the legal remedies available for a breach of contract for trade secrets may vary depending on the specific terms of the contract
Delhi High Court in John Richard Brady And Ors. vs Chemical Process Equipments (AIR 1987 Delhi 372), while discussing the topic of enforcement of trade secret referred to what Patrick Hearn, in his book the Business of Industrial Licensing has opined under the heading Secrecy. It summarizes the circumstances of breach out of which legal proceedings may arise The said part is reproduced as under
“Secrecy The maintenance of secrecy which plays such an important part in securing to the owner of an invention the-uninterrupted proprietorship of marketable know-how, which thus remains at least a form of property, is enforceable at law.
That statement may now be examined in the light of established. rules making up the law of trade secrets. These rules may, according to the circumstances in any given case, either rest on the principles of equity, that is to say the application by the Court of the need for conscientiousness in the course of conduct, or by the common-law action for breach of: confidence which is in effect a breach of contract.
In considering these alternatives there are three sets of circumstances out of which proceedings, may arise:
(a) where an employee comes into possession of secret and confidential information in the normal course of his work, and either carelessly or deliberately passes that information to an unauthorised person;
(b) where ah unauthorised person (such as a new employer) incites such an employee to provide him with such information as has been mentioned above; and
(c) where, under a license for the use of know-how, a licensee is in breach of a condition, either expressed in an agreement or implied from conduct, to maintain secrecy in respect of such know-how and fails to do so.
While Delhi High Court in Ritika Private Limited vs Biba Apparels Private Limited decided on 23 March, 2016, on legal recourse against violation of trade secret made it necessary for the plaintiff to first establish ownership of the trade secret. The opinion expressed in the said decision is under:
So far as the issue of violation of trade secrets is concerned…If an injunction order is sought with respect to trade secrets then such specific trade secrets have to be mentioned and as to how those trade secrets are in the ownership of the plaintiff, and only thereafter the court can consider the grant of any injunction order on the basis of specified trade secrets and it cannot be that a general order can be passed that there is presumed to be a trade secret of the plaintiff and the defendant to be injuncted with respect to that unspecified trade secret which is not described in the plaint, and with respect to which thus no specific injunction order qua specific trade secret can be passed.
Indian penal code
Criminal breach of trust (section 405) and theft (section 378)
Criminal breach of trust and trade secret theft are two distinct legal concepts, but they can sometimes be related.
Criminal breach of trust refers to a situation in which a person, such as an employee or agent, is entrusted with someone else’s property or assets but then dishonestly misuses or misappropriates them for their own benefit. This can include money, securities, documents, or other valuable items. Criminal breach of trust is a criminal offense that is punishable by law.
In some cases, criminal breach of trust and trade secret theft may overlap. For example, an employee who is entrusted with a company’s trade secrets may commit a criminal breach of trust by using those secrets for personal gain or disclosing them to unauthorized parties. In such cases, the person may face both criminal charges for breach of trust and charges for trade secret theft.
Copyright Law And Trade Secrets
Copyright law protects original works of authorship, such as literary, musical, and artistic works, as well as software and computer code, providing creators with an economic incentive to produce and distribute their works, while as we have discussed, trade secrets refer to confidential information and unlike copyright law, trade secret protection does not require registration and is not publicly disclosed.
While copyright law and trade secret law are different, there can be some overlap between the two. For example, software can be protected both by copyright law and can involve element of trade secret. Thus in some cases, companies may choose to rely on both forms of protection.
To summarize, the commercial value of trade secrets and vulnerability of being stolen, often by insiders , is a subject of concern for enterprises and though legal remedies can be availed against infringers, but when it comes to protecting trade secrets prevention is better than cure and calls for multifold steps that a business needs to take to protect the information.
LAW-IP AND MORE 