PROTECTION OF TRADE SECRETS – THE SCENARIO IN INDIAN LEGAL SYSTEM

INTRODUCTION

Trade Secrets hold critical significance as they endow scope of uniqueness for growth of businesses. North American Free Trade Agreement (NAFTA) in Article 1711 states that “a trade secret is any information having commercial value, which is not in the public domain, and for which reasonable steps have been taken to maintain its secrecy”[1].

Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement has in Article 39.2, parameters for any information to fall within contours of trade secret, which are –

(a)The information is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons that normally deal with the kind of information in question;

(b)The information has actual or potential commercial value because it is secret;

(c)The person lawfully in control of the information has taken reasonable steps under the circumstances to keep it a secret[2].

In India there is no legislation enacted explicitly for the subject matter of trade secrets. Thus, whenever issues related to trade secrets arose, the jurisprudence in India has excogitated by means of judgments pronounced following the principles of equity, contract and tort law. Ever since the Indian judiciary has braved the adjudication due to absence of any certain enactment to rely upon.

The implications of trade secrets entail restrictions in some trade practices. This attracts Section 27 of the Indian Contract Act which states that all agreements in restrain of trade are null and void. But including exceptions to it, the Law Commission of India in 1958 recommended to allow reasonable restrains. Thus, trade secrets earned their validity on account of reasonability.

CASE LAWS

The High Court of Delhi in the case of John Richard Brady and Ors v. Chemical Process Equipment P Ltd and Anr[3], observed that the plaintiff had trade secrets related to business of producing fodder, which were utilized without authorization. The defendants were under an obligation to keep that information confidential as it was for strategic development of business. The defendants unfairly misappropriated the trade secret by misusing the secret specifications, technical information that was shared with them under a binding agreement of confidentiality which the defendants breached. This fairly justifies the remedy entitled to the plaintiff to restrain the defendants.

Another case of Daljeet Titus, Advocate v. M Alfred A Adebare and Ors[4]  was about an agreement with Duchess of Argyll and Ors, the court observed that there was breach of agreement of confidentiality by defendant side. Also the court ordered that the defendants are forbidden to utilise for their own benefit, the strategic information that was entrusted to them after they breached the confidentiality agreement. The court passed the order of injunction to restrain the defendants from any further appropriation of trade secrets of plaintiff’s business. the trade secrets include under its scope the due diligence reports, data of customer, and any such information made accessible to defendants in the nature of being strategically valuable to business and classified to gain edge over competitors.

In a matter before the Delhi High court related to trade secrets of banks as business doing entities, it was held that banks possess information with regards to their customers derived out of their monetary relations. The banks are under strict obligation to protect the information shared with them. Thus, they cannot disclose such information to a third party and it has to be kept confidential. In case if the nature of information is such that it is to be kept confidential but is found to be divulged, stolen, or misappropriated then the bank shall be liable for breach of confidentiality.

REMEDIES FOR INFRINGEMENT OF TRADE SECRETS

The remedy in the case of infringement of trade secrets can be of two kinds. First by passing an order of injunction to restrain the defendant from further appropriation of trade secret information. For this remedy, prima facie case is the condition, establishment of which can pass the order which would otherwise be rejected. Secondly, compensation awarded to the plaintiff to restore its position from loss. As per Section 41 (e) of the Specific Relief Act, injunction cannot be specifically enforced by the court should not be granted.

SUGGESTIONS FOR ENACTMENT ON TRADE SECRETS

Advertently, Indian legislature should enact a definite law pertaining to trade secrets. Aid can be sought from legal systems of other nations which have previously enacted the law.  The Indian law could conveniently be based on principles that are lifted off English Law and English courts or the Federal Trade Secrets Law of USA under the Uniform Trade Secrets Act, 1990, the Restatement (Third) Unfair and the judicial pronouncements of the same.[5]

The nature of information should be unambiguously codified which can fall within the scope of trade secret’s definition with captiously providing exceptions. The protection should be mandated for such information which is composite in nature as against distinctive and unitary information. The wrongs committed against protection of trade secrets must be identified on factors like obligation to maintain confidentiality, means of breach, intention of the defendant, etc. thus there can be misappropriation of information, breach of trust. Also, manner of examining the terms of confidentiality agreement should be prescribed in the enactment. A specialized adjudicating body or tribunal for trade secrets can be established. The Uniform Trade Secrets Acts, 1990 of USA propounds the doctrine or displacement wherein if the cause of action is in conflict with the trade secrets misappropriation then it is displaced or preempted.[6] The law should also prescribe time limit for using a trade secret after which it can be made public. On account of globalization and expansion of businesses, the implications in cases of outsourcing have to be ascertained. This would involve principles of common law like principles of vicarious liability.

[1] NAFTA. art. 1711.

[2] TRIPS. art. 39, cl. 2.

[3] John Richard Brady and Ors v. Chemical Process Equipment P Ltd and Anr, AIR 1987 Delhi 372.

[4] Daljeet Titus, Advocate v. M Alfred A Adebare and Ors, 130 (2006) DLT 330.

[5] Niharika Sanadhya, Protecting trade secrets in India in absence of a Regime, Khurana &Khurana Advocates And IP Attorneys, (Jun. 9, 2020, 01:22 PM), khuranaandkhurana.com/2020/06/09/protecting-trade-secrets-in-india-in-the-absence-of-a-regime/#_ftn6.

[6] Supra note 5.

 

Article submitted as a Part of Internship at Chair on IPR,CIPRA by:

Khyati Sharma,

 

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