India: Trade Secret Laws: Need Of An Hour

Last Updated: 22 April 2019
Article by Oorja Jain

"Trade secret protection directly addresses the appropriability problem by limiting contracting parties use and dissemination of proprietary information, thereby enhancing incentives to produce valuable information.[i]"

When we see the Indian laws there are no such legislations with regard to the same but this concept has been widely discussed around the world. India tried to resolve the protection of Trade secret in a joint statement made in 2015 in the Trade Policy Forum with the United States.[ii] On the 12th May 2016, the Union Cabinet approved the NIPR Policy (National Intellectual Property Rights) which basically focused on the upcoming growths of the ideas, innovation and technologies. India have recognised major forms of IPR like copyrights, patents, trademarks etc. but has some where lacked to recognise the concept of Trade secrets, they have no statutory recognition. The issues or the problems related to trade secrets in India are being resolved using the principle of common law, equity, Sec 16[iii] of The Copyright Act, Sec 405[iv] of the Indian Penal Code, Sec 2(3[v]) of the National Innovation Bill and Sec 27[vi] of the Indian Contract Act.

A trade secret refers to any information or data which is not disclosed to general public and which the owner attempts to keep confidential.[vii] The TRIPS Agreement lays down the following basic criteria for as to the any information to be kept as an undisclosed information or as a trade secret:

  • The data must not be readily accessible or known by those individuals who deals such sort of information generally.
  • The information must have a commercial value as secret.
  • The lawful owner of the same must have taken reasonable steps to ensure its secrecy.

Trade secrets are basically of two types:[viii]

  1. It generally relates to any invention or process of manufacturing which can be disclosed in public, which can only be sheltered as a trade secret as it does not fulfil the patentability criteria. This information may include the customer details or any secret manufacturing process as in the case of coca cola.
  2. It includes some innovations which can be patented and are protected under the patent act. In such kinds of information the owner on his discretion may keep it as secret or get it patented.

Being a signatory of the TRIPS Agreement India is under an obligation to legislate the laws with regard to IPR in accordance to the international standards. Although there are no such legislations related to IPR but India has achieved a lot by enacting new laws and amending the old ones as to IPR because of which the foreign investors are so cautious about the protection of secrets in India[ix]. The National Innovation Bill was drafted in 2008 was drafted basically for the protection of trade secrets and confidential but it was unfortunately does not get passes by either of the Houses of Parliament.[x] The judiciary relies upon different legislations to resolve the problems.

The law of the land The Constitution of India provides for 'Right to Free Mobility' under Art 21 and Art 19(1)(g) in accordance to some reasonable restrictions. Art 19(1)(g)- Every citizen of India has freedom to practice any profession, or carry on any occupation, trade or business. It also provides the freedom to get employment and work in raising the living standards, right against the employer that he cannot restrain an employee from performing his work nor to work forcefully[xi]. Art 21 guarantees human rights to every citizen and non-citizens.

If any restraint made by the employer in any contract with his employee requiring him not to get into any service or employment for a reasonable period such control is Valid under the English laws[xii] but void under the Indian laws[xiii].

Sec 27 of The Indian Contact Act, 1872 states that the agreement in restraint of trade are void with an exception that an individual may limit it under some valid conditions not to carry the business with specific limits to the reputation of their industry. The literal interpretation of the provision does not expresses any such exception but it has been drawn because of the judicial interpretation which implies that an employee can be restrained to trade only on some reasonable grounds.

There are some issues with this provision:

  1. It actually do not concern with the protection of legal rights.
  2. It does not actually provides with the remedies to the owner of the trade secret.

The theft of trade secret can also be filed to the police under Sec 378 of IPC which includes stolen confidential client list, business innovation etc. IPC also punishes for criminal breach of trust & confidence under sec 405 & 408 read with Sec 420 i.e. cheating.

Even after having such laws it is the need of an hour to understand that these legislations are not enough to protect the trade secrets so it is required to legislate new and proper laws related to it. The penal laws should also include provisions for criminal misappropriation in case the trade secrets are leaked, high standards of secrecy should be maintained within an organisation and audit for the same must be done on regular basis, employee should be well aware with the trade secrets policies also.

"Trade your secrets and become who you are.[xiv]"

Footnotes

[i] Friedman, Landes and Posner, 1991

[ii]https://ustr.gov/about-us/policy-offices/press-office/press-releases/2016/october/%E2%80%8BIndia-US-Joint-Statement-TPF

[iii] No copyright except as provided in this Act

[iv] Criminal breach of Trust

[v] Definition of Confidential information

[vi] Agreement in restraint of trade

[vii] American Express Bank Ltd. V. Mrs.PriyaPuri MANU/DE/2106/2006

[viii] www.wipo.int

[ix] ISSN: 2394-5044(2017) Nikhil Nair, "Are The Trade Secrets in India Satisfactorily Protected?" The World Journal of Juristic Policy

[x]https://spicyip.com/2008/10/innovation-bill-2008-and-trade-secrets.html

[xi]Gujrat Bottling Compant Ltd. & Others V. Coca Cola Company & Others, MANU/SC/0472/1995; WIPRO Ltd. V. Beckman Coulter International S.A. MANU/DE/2671/2006

[xii] Supra Note 20

[xiii] Superintendence Company of India V. KrishanMurgai 1980 AIR 1717; 1980 SCR (3)1278

[xiv] Frank Warre

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