Trade Secrets- by Sejal Chaturvedi

INTRODUCTION

Trade secret is a part of intellectual property right and laws. Intellectual property rights basically refer to anything innovated, created, or even curated in a manner that is unique, exclusive, and sets apart you or the company in the market. For example- the new model of SUV, updated smartphones, the logo of your brand, a fictional story, etc. such pieces of innovation or creation are unique to their creator and he/she must get their due credit. The commonly known IPRs are Trademark, copyright, patent, and design. One such IPR is a Trade secret.

A trade secret can be defined as a piece of information about a business, product formulation, or manufacturing method which is confidential and unique. This secret information is of high commercial value, and if leaked in public will be highly detrimental to the owner. A trade secret needs to be protected from getting copied to retain the uniqueness of the brand/ product to retain and also expand space in the market. The biggest example is the recipe for COCA COLA. The formulation of this soft drink is of high commercial value and is unique and confidential. Along similar lines, a trade secret can also be the formulation of a perfume, manufacturing processes of snacks, soaps, or fabrics, or even your business database.

DEFINITION

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) lays out three basic characteristics that any knowledge must meet before it can be called concealed information (trade secret) which are as follows:

• Such information must be kept secret, that is, it must not be widely known or easily available to “those inside the circles that regularly deal with the types of information in concern.”
• Because the information is confidential, it must have commercial value.
• The information must be kept private by its owners taking reasonable precautions.

A trade secret is defined under the North American Free Trade Agreement (NAFTA) as “knowledge having an economic value that is not in the public domain and for which reasonable efforts have been taken to protect its secrecy.”

DIFFERENCE BETWEEN ANY CONFIDENTIAL INFORMATION AND TRADE SECRETS-

All trade secrets are confidential but not all confidential information is treated as a trade secret. There may be various degrees of confidential information inside a company, with trade secrets being the highest level of confidential information. There should be a separation between generally available (internal) sensitive information and trade secrets that require specific oversight. This means that the standard techniques for maintaining sensitive information may not be sufficient for managing trade secrets.

Although the words confidential information, trade secrets, proprietary information, and even know-how are sometimes used interchangeably, they are understood differently, and the remedies for illegal disclosure of such information also differ. For instance, the account books of every company are a piece of confidential information but it won’t be termed a  trade secret.

PROTECTION OF TRADE SECRET

In India, this is not yet defined as an IP. As result there is no law or legislation which defines trade secrets nor is there any legislation for its infringement. However, there are allied/ related laws that protect confidential and sensitive information. Thus Indian courts and tribunals have maintained trade secret protection under various laws such as contract law, copyright law, equity principles, and common law breach of confidence actions (which is a breach of an obligation to keep a piece of information secret). In addition to the foregoing, the Information Technology Act of 2000 establishes legal safeguards for sensitive information in the form of electronic records.

Under contract law, Non-disclosure agreements (NDAs), for example, are the most commonly used mechanism for protecting trade secrets. if there is a breach of trust between parties due to sharing of confidential information, criminal or civil suits are filed. Furthermore, since  NDAs provides for heavy penalties for violation, they deter the third party from leaking information. Even though there is no dedicated alternative dispute resolution (ADR) methods for disputes involving trade secrets in India, every NDA should include an ADR clause.

Likewise, trade secrets can be protected under some other heads or definitions under the following laws- Sections 51, 55, and 63 of the Copyright Act of 1957

The Designs Act of 2000

• Sections 65 and 72 of the Information Technology Act of 2000
• Sections 408, and 415 of the Indian Penal Code
• Section 27 of the Indian Contract Act
• Section 3 of the Competition Act of 2002
• .Code of Civil Procedure
• Code of Criminal Procedure

CONCLUSION

It can be summarised that a trade secret is a piece of valuable information, which forms the core of a business enterprise. That core in itself has a high commercial value, as without its uniqueness and exclusivity a company or product will lose its market. Thus a trade secret needs to be equally valued under the IP laws of India and at an international level as well. This field is yet to receive its due recognition and protection in the world of IP laws and advocacy.

DISCLAIMER- 

The views are that of author’s own and not necessarily the views of IPTSE Academy. This blog is a platform for academic discussions and hence authors have been given flexibility to convey their thought process.

AUTHOR:

Sejal Chaturvedi

Student

Symbiosis Law School, Hyderabad