-Angel Fernandes
Table of Contents
INTRODUCTION
Responding to the new and growing demands and desires of current and future clients necessitates the development of new or enhanced goods and services in a highly competitive business environment. To survive, develop, and prosper in this environment, a current or new firm must be able to produce or obtain the necessary valuable information to create and supply new or enhanced goods or services in the marketplace. Such valuable data is considered a “trade secret”.
Competitors frequently obtain this type of data quite readily, for example, by winning over or simply hiring away key workers who generate or have access to such important, sensitive information that offers the organization a competitive advantage. Organizations have confidential information that is critical to acquiring and retaining a competitive advantage in the market. Businesses may incur irreversible losses if sensitive information of economic worth is leaked to other entities. This sort of data is referred to as a trade secret.
Trade Secret
A “trade secret” is any sensitive commercial data that gives an organization a competitive advantage. Manufacturing or industrial secrets, as well as commercial secrets, are examples of trade secrets. The unauthorized use of such material by anybody other than the holder is considered unethical and a breach of the trade secret.
The information which may be thought of as a trade secret:
(1) A trade secret might be information about a formula, pattern, technology, or other compilation of information that has been utilized for a long time in a corporation.
(2) A trade secret is frequently technical information utilized in the production process to manufacture commodities.
(3) A trade secret can be related to marketing, export, or sales tactics, as well as a system of accounting or other corporate communication routines or operations, including software utilized for different organizational objectives.
TRADE SECRET ADDRESSED IN INDIA
While confidential commercial information has existed since the beginning of time, a trade secret is a more modern concept. Patents, copyrights, trademarks, and trade secrets are India’s newest and least established categories of intellectual property (“IP”). In India, there is no particular statute protecting trade secrets, however, Indian courts have acknowledged that sensitive company information serves as trade secrets occasionally. In today’s dynamic business environment, trade secret protection is vital due to fierce competition, employee mobility, and the emergence of spin-off and start-up enterprises.
Leading firms and entrepreneurial organizations understand the need for effective patent protection, but they frequently ignore the formula, technologies, techniques, trends, procedures, data compilations, and methodologies associated with patents and bringing innovative products to market.
If an employee departs with your vital secrets memorized or in a briefcase, or if you are subject to data breaches, theft, or nondisclosure agreement violations, your firm is affected with a huge amount of risk. As a result, the most effective strategy to secure trade secrets is to first define what qualifies for protection before developing and implementing sophisticated trade secret regulations and procedures suited to a certain corporation. As a party to the Agreement on Trade-Related Aspects of Intellectual Property Rights, India is obligated to bring its intellectual property law framework in line with current International Standards. To a significant extent, India has met this commitment by implementing new and revising existing intellectual property statutes.
NEED FOR PROTECTION OF TRADE SECRETS
A strong legal framework for protecting trade secrets will help Indian businesses develop innovatively. Trade secrets and their security appear to be vital to all sectors of the economy, highlighting their high prevalence and value to nearly all Indian states, regardless of size, since the significance of trade secrets is recognized by large, medium, and small enterprises similarly. Trade secret protection enhances and enhances the protections provided by patents, copyrights, and other measures. As a method for safeguarding trade secrets, Indian courts have relied on equitable and common law procedures.
There are three basic forms of regulations in the United States. The federal Economic Espionage Act of 1996 criminalizes misuse of trade secrets with up to ten years in jail and penalties of up to USD 5,000,000 for enterprises. Furthermore, under federal law, the US International Trade Commission has the authority to halt imports of items created as a result of trade secret theft. State civil enforcement laws are generally standardized.
Except for New York, North Carolina, and Massachusetts, every state in the United States has enacted a “uniform act” to safeguard trade secrets. At the end of 2013, the European Commission proposed a new Directive to unify trade secret protection. This Directive incorporates a number of common principles and largely reflects the requirements of the Agreement on Trade-related Aspects of Intellectual Property Rights relating to the protection of concealed information.
However, in terms of the Indian aspect, the Indian courts’ primary criterion for a basis of action for a breach of trust is drawn from English common law and stated as follows:
- the information itself must have the requisite character of confidence about it;
- the information must have been transmitted under circumstances imposing an obligation of confidence; and
- the information must be used unlawfully to the injury of the party imparting it.
WAYS TO PROTECT
- Limiting physical and technological access to private data to those who truly need the information.
- Maintaining information under data encryption.
- Discarding private information by information-destroying methods like shredding.
- Conduct exit interviews with outgoing workers to make sure that any confidential information in their possession is returned and to emphasize confidentiality duties.
- Ensuring that the contract terms contain clauses against restraint of trade.
- Prioritize the protection of trade secrets.
REMEDIES AVAILABLE
In India, the following legal or equitable remedies are available:
- An injunction prohibiting the third party from exposing the trade secrets.
- All confidential and intellectual information must be returned.
- Compensation or penalties for any losses incurred as a result of the misappropriation of trade secrets.
- The court may also order the wrongdoer to “provide” such materials.
STATUTORY PROVISIONS
Despite the courts regularly recognizing trade secrets as intellectual property that may be protected and preventing their breach, there is currently no legislative protection for them in India. Applying the law of unfair competition, equity breach, and contract law have so far prevented such violations. There is no formal legislation covering this issue. The Division Bench of the Allahabad High Court of India noted that a trade secret is a type of intellectual property right in the decision published in Cattle Remedies v. Licensing Authority, 2007 (2) AWC 1093. The TRIPS rules, however, have not yet been expressly used by Indian courts.
Common law serves as the foundation for most trade secret protection in India. Common law concepts like the breach of trust and confidence are applied in courts. The only statutory provision that addresses trade secrets is Section 27 of the Indian Contact Act of 1872, which declares that any agreement prohibiting someone from engaging in any activity is void. Non-disclosure and non-compete clauses, which are essential for the protection of trade secrets, are included in the scope of this section.
It is also possible to use The Indian Penal Code, 1860, Sections 405–409, which deal with criminal breach of trust, and Section 418, which deals with fraud, but only in order to get a suitable remedy for a serious offense.
Databases are crucial instruments for a business’s efficient operation. The Copyright Act of 1957 provides protection for databases. Computer programs, tables, and compilations, including computer databases, are included in the definition of “literary works” under Section 2 of the Act. The circumstances under which a copyright infringement occurs are covered in Section 51 of the Copyright Act. Section 55 of this Act deals with copyright civil remedies, whereas Section 63B of this Act deals with copyright offenses as criminal offenses.
The Securities Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 is yet another possible source for the legislation on trade secrets. As a result, under the Securities Exchange Board of India Act, insiders may be prosecuted for using and disclosing confidential information. This demonstrates unequivocally the necessity for effective trade secret protection.
Information saved on computers, whether it is confidential or not, is protected by the Information Technology Act of 2000. According to Section 66, the penalty is a period of imprisonment of up to 3 years, a fine of up to Rs. 5 lakhs, or both.
CASE LAWS
📍American Express Bank Ltd. vs. Ms. Priya Puri, (2006) IIILLJ 540 Del
It is important to note the Delhi High Court’s decision in the case of American Express Bank Ltd. vs. Ms. Priya Puri, (2006) IIILLJ 540 Del. In this instance, the defendant was giving the plaintiff in northern India her 30-day notice as she resigned as head of wealth management and filed her resignation to the plaintiff. At this phase, the plaintiff asserts that the defendant infringed the plaintiff’s intellectual property rights and that she had provided confidential material to individuals who were unassociated with the company’s business, utilized trade secrets and confidential information for her personal gain, and breached the American Express customer privacy policy.
The Court stated that trade secrets are “…a formula, technical know-how, or a particular manner or practice of business established by an employer which is inaccessible to others.” Such data reasonably affects organizational development and financial interests.
📍Burlington Home Shopping Pvt Ltd v. Rajnish Chibber, 1995 PTC (15) 278
Additionally, the Delhi High Court ruled in Burlington Home Shopping Pvt Ltd v. Rajnish Chibber, 1995 PTC (15) 278, that the organization’s database may be protected by copyright and that any unauthorized use of it by a third party constitutes infringement. Inferring from the Court’s interpretation of NDAs, NCCs, and trade restrictions under Contract law, one might assume the judicial policy for the protection of trade secrets.
📍Bombay Dyeing and Manufacturing Company v. Mehar Karan Singh, (2010 (112) BomLR 375)
In the case of Bombay Dyeing and Manufacturing Company v. Mehar Karan Singh, (2010 (112) BomLR 375), the respondent was the whole-time Director of the Plaintiff-Company appointed according to a Contract Of employment. In accordance with the aforementioned agreement, he furthermore guaranteed not to disclose or reveal any kind of confidential material to other parties in violation of a confidentiality clause. A guide of specially designed software for Plaintiff’s real estate firm, which was acquired by Plaintiff after paying a software manufacturer company, Oracle, Rs. 93 lakhs, was purportedly forwarded on email by Defendant to a competing company, according to the Plaintiff-Company.
The Court granted an injunction in favour of Plaintiff prohibiting Defendant from disclosing or passing over the proprietary information in any way contained in the software manual attached to Defendant’s email and the Memorandum of Understanding attached to another email of the defendant, both of which relate to a property owned by the Plaintiff in Goa.
CONCLUSION
Traditionally, the subject of Confidential Data Protection in India has been addressed through the use of applicable provisions of The Indian contract act, 1872. Trade secret protection in India is still in its earliest stages of development, with no formal statute codifying the foundations of trade secret law. This runs counter to the global trend of codifying common law concepts for trade secret protection. In reality, the Indian Court’s application and interpretation of common law principles to trade secret protection have been remarkably diverse. As a result, enacting statutory laws governing trade secrets and secrecy within the framework of Intellectual Property Rights is not just a viable approach, but also a matter of critical importance.
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