TRADE SECRETS REGIME IN INDIA – EVOLVING JURISPRUDENCE AND NEED FOR LEGISLATION

Deepika Gupta

GROWING DEMAND OF TRADE SECRETS

Trade secrets are considered to be a crucial part of Intellectual Property as it relates directly to the growth of a company and is precarious for its survival. Over the past few decades, the demand and need for protection of sensitive and confidential information are increasing, which were earlier covered by Non-Disclosure Agreements (NDAs).[1] Businesses must ensure effective protection of their ‘business process’, technical ‘know-how’, and ‘confidential  information’ from their competitors. Trade secrets encompass formulae, technical know-how, or a peculiar mode or method of business adopted by an employer that is unknown to others.[2]

Trade secrets are confidences consisting of some commercial or economic value which is usually not known to the general public and it is the duty of the owner to  keep it as a secret.[3]They consist of virtually any information developed by the company through the expenditure of their time and effort, unknown to others in competing businesses, and gives them an advantage  over their competitors [4]. Examples of some famous trade secrets include  Google search Algorithm, Coca Cola beverage recipe, Listerine, Krispy Crème Doughnuts, etc.

Trade secrets are protected worldwide, and the treaties such as Agreement on Trade-Related Intellectual Property Rights (TRIPS), which is the first multilateral agreement largely drawn from the ‘Uniform Trade Secret Act’ (UTSA)[5] of the USA and the Northern American Free Trade Agreement (NAFTA) governs the laws on the protection of Trade secrets internationally. In India, protecting trade secrets is challenging,and the various aspects which could protect the rights of businesses, and individuals for holding confidential information and technical know-how are yet to be developed.

PRINCIPLES GOVERNING PROTECTION OF TRADE SECRETS IN INDIA

In India, trade secrets and confidential information[6]are not protected under any codified legislation. The courts refer to common law remedies for the protection, reliance is placed on the case Saltman Engineering Co. Ltd. [7]where the principle of breach of confidence action was established.  However, courts in India endorse the protection of trade secrets through traditional judicial rulings and mainly on the ‘principle of equity’ and on the basis of common law action of ‘breach of confidence’ and  ‘breach of contractual obligation[8]’. An individual or a business in India can contractually bound anyone not to disclose any information that is disclosed to him/her in confidence. Recently in,  Steer Engineering Pvt. Ltd. v. Glaxosmithkline Consumer & Ors[9], the principle for the protection of  confidential information or trade secret was laid,the company Steer filed a suit seeking a perpetual injunction for protection of the technology of extrusion process and know how it has provided to Glaxosmithkline for the manufacture of Horlicks, a famous nutritional food powder. Also, in case of a technology transfer agreement, Indian courts have upheld a restrictive clause that inflicts negative covenants on the licensee, to not disclose or use the information received under the agreement for any purpose other than that agreed in the said agreement.[10]In John Richard Brady and Ors. v. Chemical Process equipment P. Ltd. and Anr.[11], the Delhi High Court stated the unauthorized use of trade secrets and in the interest of justice, the court invoked a wider equitable jurisdiction and awarded injunction even in the absence of a contract. 

NEED FOR TRADE SECRET PROTECTION IN INDIA

In India, amid the other IPs, trade secrets protection is not covered under any statutory position, and trade secrets are considered to be one of the most sequestered regimes from a legal perspective. The present law system which in some manner seeks to provide interim protection to those possessing technical know-how or information is subjected to several flaws and shortcomings.There exists no consent or consistency among the present laws, and when the cause of action is a breach of confidence there are only civil or equitable remedies available. The law on this issue is still at an emerging stage and there are several concepts that have not been introduced yet to the present law. Therefore, the present system is extremely  ambiguous and inconsistent, which further leads to impediments in the growth of the economy. There is a critical need to extend protection to reassure innovation and promote standards of commercial ethics and fair dealing in the area. In India, the discovery of trade secrets is not actionable in all cases and trade secrets owners have resort only against misappropriation, this demands a need for adopting laws to impose criminal liability upon infringers.

A FUTURE PATHWAY

Trade secret protection is a major Intellectual Property issue for every country and the operative laws are important for well- functioning of the government and success of a business. It is noticed that the current legal system which tries to accommodate the aspects of trade secrets in India is still extremely undeveloped and vague. Since India is a signatory to the TRIPs Agreement, it must compel with Article 39[12] of the agreement and should follow the ‘Sui Generis’[13] system as this will help the country in developing a way of revering trade secrets. India needs to develop and pass the New Innovation Bill, 2008 that would ‘consolidate and codify the law for the protection of trade secrets, innovation, and confidential information’[14]. It should frame specific legislation that will foster the growth of an economy through foreign direct investments  and this will make the emerging Indian market more secure and stable. Also, the businesses and individuals affected will have a class of remedies available through which they can seek to enforce their rights by ensuring not only a compensatory indemnification but also a criminal liability to the offender.


[1] Ramesh Vaidyanathan, ‘Trade Secrets And Confidential Information’, Advaya Legal (September 30, 2010), Available at https://www.advayalegal.com/blog/trade-secrets-and-confidential-information/

[2]American Express Bank Ltd. v. Ms. Priya Puri, (2006) III LLJ 540 Del.

[3]Burlington Home Shopping Pvt. Ltd v. Rajnish Chibber, 1995(61) DLT 6.

[4]Vandana Pai & Ramya Seetharaman, ‘Legal Protection of Trade Secrets’, (2004) 1 SCC (Jour) 22.

[5] The UTSA defines trade secret to mean information, including a formula, pattern, compilation, program device, method, technique, or process, that: i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

[6]Section 2(3) of the National Innovation Act(Draft),2008 defines ‘Confidential information’ as information, including a formula, pattern, compilation, program device, method, technique, or process.

[7]Saltman Engineering Co. Ltd. v. Campbell Engineering Co. Ltd., 1948 (65) R.P.C. 203.

[8]The Indian Contract, 1872.

[9]Steer Engineering Private Limited vs. Glaxosmithkline Consumer Healthcare Holdings (US) LLC and Ors., Commercial Appeal No. 5 of 2019, MANU/KA/7445/2019.

[10]Pratibha Ahirwar, ‘What To Choose Between Trade Secrets And Patents’by  Khurana and Khurana (21 February 2019), Available at https://www.mondaq.com/india/trade-secrets/783558/what-to-choose-between-trade-secrets-and-patents

[11]John Richard Brady and Ors V. Chemical Process Equipments Pvt. Ltd. and Anr., AIR 1987 Delhi 372.

[12] Each member state is liable to frame a specific legislation protecting sensitive data and expertise by way of trade secrets.

[13]Article 10bis of the Paris Convention.

[14]National Innovation Act of 2008 (Bill).

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