Trade Secrets Protection in India

The concept of property has undergone a sea change over the years. Gone are the days of the industrial age where machinery and mechanisms were the important assets of a company and patents were a prized possession. In the present day, while estimating the value of any company the highest value is placed on its trade secrets. Today we try to understand the nature of trade secrets and the trade secret protection regime in India.

Can anyone tell me the process of manufacturing Coca-Cola? Or, what are the 11 herbs and spices that KFC uses? Try googling it.

Try as hard as you may, you will never find it. This is because the recipe of Coca-Cola and the constituents of the 11 herbs and spices of KFC are kept in high-security vaults and are accessible only to the top-ranking officials of the respective companies. Why you ask? This is because the Coca-Cola recipe and the constituents of the 11 herbs and spices of KFC are trade secrets.

What is meant by a Trade Secret?

A trade secret is a kind of information which has high commercial value (owing to its confidentiality) and can be protected from misuse or misappropriation under common law or contract law.

Now, the Agreement on Trade-Related Aspects of Intellectual Property Rights provides for the protection of ‘undisclosed information’. Article 39 of the TRIPS Agreement states that in order to ensure effective protection against unfair competition, it is imperative to protect undisclosed information. Further paragraph 2 states that any natural or legal person can protect information lawfully within their control from being disclosed or acquired by others without their consent in a manner contrary to honest commercial practices. However, such information should be a secret i.e. it should not be known or accessible to persons who normally deal with that kind of information. The information kept as a secret should have commercial value and there should have been reasonable efforts to keep the information a secret.

What makes a Trade Secret from other forms of Intellectual Property?

Trade secrets have a much wider scope than patents, trademarks or copyrights. For instance, patents require that the invention be novel, industrially applicable and nonobvious. In addition, it should be open to public disclosure and needs to strictly fall within the framework of patentable subject matter. Lastly, patent protection is only granted for a duration of 20 years. Likewise trademarks only protect a printed word or an image representing a product or service while copyright protects only the manner of expression and not the content or idea. Also, the protection is limited in nature.

Trade secrets, on the other hand, do not mandate such requirements. The primary purpose of a trade secret being protected is its utility-therefore a trademark should have some utility. The most important criteria of a trade secret are that both the content and the expression should remain a secret.

WHAT ARE THE PROS AND CONS OF HAVING A TRADE SECRET?

Having a trade secret has its own share of advantages and disadvantages. Among the advantages include:

No registration cost.

No time limit for protection.

Protection is immediately effective.

It does not require any disclosure or registration with the government.

On the other hand, the disadvantages include:

If the secret is embodied in a product, it can be discovered through reverse engineering and patented by another party.

No protection if the secret is disclosed.

It is effective against only improper acquisition and use. There is no safeguard against fair discovery.

Protection granted is weaker than that of patents.

HOW ARE TRADE SECRETS PROTECTED IN INDIA?

Surprising as it may sound, there is no law for the protection of trade secrets in India. However, this does not mean that trade secrets are devoid of any form of protection. In the absence of a statute, several judicial decisions have forwarded the cause of protecting trade secrets. However, the absence of a legislative backing leaves a lot to be desired.

In India, the only means through which a trade secret can be protected is by way of a contract. Non-disclosure agreements and restrictive covenants are usually adopted means. However, this method is not fool-proof. First, such contracts are usually not favored by the courts and are unenforceable by statute in some states. Second, a criminal action cannot be brought against someone in the event of disclosure of the secret. The only source of relief is a civil suit wherein damages can be sought. However, despite the quantum of damages awarded to the Plaintiff Company or individual, the economic loss caused to the plaintiff by the disclosure of the trade secret is usually massive and results in irreparable damage.

In such a scenario, India is in desperate need of legislation that aims at protecting trade secrets. With India being a host to various companies, both national and international, a trade secret law is imperative. An absence of such a law renders the trade secrets of such companies vulnerable and can have a crippling effect on the business of the company as well as the Indian economy.