India: Protection Of Trade Secret

The importance of trade secret in the ambit of intellectual property has gained widespread recognition so much so that trade secret protection of working technologies has taken precedence over protection through patents. North Atlantic Free Trade Agreement (NAFTA) and Agreement on Trade Related Aspects of Intellectual Property (TRIPs; Art. 39) include specific provisions directed towards increasing the protection of trade secrets. Prior to these agreements, Article 10bis of the Paris Convention (covering unfair competition) provides support for international standards of trade secret protection but there is a lack of a comprehensive international treaty on the line of patent, copyright and trademark law. A lack of definition of what constitutes a trade secret also contributes to this amorphous state of affairs.

Universally, the accepted fact is that to be protected as a trade secret, the subject matter must be kept ‘secret’ although it will depend on how the term is construed. The factors, which determine whether something is a trade secret includes the extent to which the information is known outside the business, the extent it is known by the employees, the value in having the information as against competitors and the time and expense it would take others to duplicate the information.

Thus, as a general rule, a trade secret can be any information not commonly known in the relevant industry that is used in connection with a business to obtain a competitive advantage and the ‘secret’ information is identifiable and is not readily ascertainable. Specifically, among the things that can be trade secrets are a formula, pattern, compilation, program, device, method, technique, or process.

Trade secrets per se cannot be legally protected, as they are secrets; what will be enforceable are the consequential effects of breach of trust or legal contracts. Legal protection of trade secrets can be derived from many diverse sources of law such as contract law, tort law, unfair competition law, criminal law, and the laws governing employee/employer relations and fiduciary obligations. The amorphous nature of trade secrets law often presents a challenge in its enforcement.

Generally speaking, if you must reveal a trade secret to a third party, you should have an intellectual property attorney prepare an underlying agreement which includes a statement as to what constitutes a trade secret and who owns that proprietary material.

At the GATT negotiations the unauthorized use of ‘confidential’ information, belonging to others, was opined as an unfair practice. On the basis of such a contention, Article 39 of TRIPS stipulates that Undisclosed Information, often treated as synonymous with trade secrets, can be protected as provided for in Article 10bis of the Paris Convention.

Under Clause 2 of Article 39 of TRIPS, all members will protect undisclosed information from commercial exploitation and under clause 3, data or information submitted to Government for regulatory or other approvals have to be protected from leakage to or theft by third parties.

While TRIPS includes provisions for the protection of trade secrets, under the general term ‘Undisclosed Information’, the modalities of achieving this has been left it to the individual members as to how to provide such protection.

Trade secrets are protected in India either through contract law or through the equitable doctrine of breach of confidentiality. It is common to insert clauses of confidential nature in a technology transfer or other license agreement to maintain the confidential nature of the subject matter, not only during the employment period of the employees and contractors but also after its termination, though for a fixed period of time. The skill, knowledge and experience of a particular profession can also be protected in certain circumstances from misuse through contractual obligations.

To protect the vast repository of Undisclosed Information and knowledge kept as trade secrets by their practitioners, India should consider a pro-active legislation under a `Sui Generis' system as provided for under Art.10bis of the Paris Convention and Article 39(2) and 39(3) of TRIPS. This step, along with provisions under breach of contract or non-disclosure agreement, would go a long way in developing a way of respecting trade secrets and undisclosed information as proprietary assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.