Introduction
Today's businesses operate in an increasingly competitive market where information is the key to success. One of the most difficult issues in trade secret law is how to protect the competing interests in confidential information of the employers and employees. The aim of the employers is to restrict the disclosure of confidential information, but such a restriction may hamper the employees from marketing their skills to new employers. The inevitable disclosure doctrine states that the former employee will "inevitably disclose" those trade secrets in his or her new position with a competitor employer. Using its equitable injunctive powers, a court may grant an injunction, the result of which is that the employee would no longer have the original employment and would be judicially prevented from accepting the new employment. The original employer obtains the benefit of a non-compete restriction without bargaining for it or paying for it. But this makes the employees lose quite a bit, as theoretically they may have the freedom to leave their current employment, but in reality they are restricted through subsequent injunction. New and better opportunities are lost to the workers and even the economy loses due to the decreased competition, which would ultimately lead to higher consumer prices in the market.
What is Trade Secret?
In today's world, businesses operate in an increasingly competitive market where information is the key to success. And in this cutthroat environment, it has become necessary for the companies to protect their business secrets, which gives them a competitive edge over other similar companies in the industry.
In simple terms, a trade secret is business information that is not available to the public; "any information that can be used in the operation of a business . . . and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others."1 Some of the famous examples of trade secret are the recipe of Coca Cola, criteria for the New York Times Bestseller List, the Google Search algorithm, the secret blend of herbs and spices used in KFC, and many more.
But as simple as the definition of trade secret appears, the practise and administration of trade secret law is quite a complicated matter. Any kind of information or data can be considered a trade secret as long as it is intended to be kept a secret by the employer/owner.
"The foundation of Trade Secret law has been laid under Article 10bis of the Paris Convention, 1967 and Article 39(2) and 39(3) of Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, 1955."
India does not have any particular laws protecting sensitive information and trade secrets. However, Indian courts have maintained the protection of trade secrets based on equity principles and occasionally on a common law action of breach of confidence, which is essentially a breach of contract.
In India, an individual may be required by contract under no circumstances to divulge any information entrusted to them in confidence. A technology transfer agreement's restriction clause, which places negative covenants on the licensee to refrain from disclosing or using the information obtained under the agreement for any purpose other than that specified in the agreement, has been affirmed by Indian courts.
In the case of John Richard Brady And Ors v. Chemical Process Equipments P. Ltd. and Anr2 , it invoked a wider equitable jurisdiction and awarded injunction even in the absence of a contract. "The plaintiff had invented a 'Fodder production Unit' (FPU) and for indigenous production of the same, sought supply of thermal panels from the defendant. And in that process the plaintiff had shared technical material, detailed know-how, drawings and specifications with the defendant related to the FPU. An agreement was set out between the parties for the supply of specialized thermal panels but later the plaintiffs after discovering the inability of the defendants to supply the required thermal panels did not place any order. The plaintiffs after learning about the defendant's FPU preferred a suit alleging misappropriation of know-how information, drawings, designs and specifications disclosed to defendants. And the Delhi High Court even when there was no contract, awarded injunction by invoking a wider jurisdiction."3
In spite of the secrecy, there are several cases where someone who was formerly employed by the corporation that is accusing someone else of misappropriating trade secrets does so. The owner of trade secrets may pursue the following remedies: compensation for any losses incurred as a result of trade secret exposure; restitution of all proprietary and private information; and an injunction prohibiting the licensee from disclosing the trade secret.
Trade Secret Protection under various Laws
The rationale – "behind the protection of trade secrets is to create and promote innovation, research, and development, by virtue of protecting the originator of business information. The trade secret protection is based on common law principles, specifically under the umbrella of contract, quasi-contract, and property theories."4
Since most countries lack a specific trade secret law, the owner of a trade secret must rely on applicable national law provisions against unfair competition, pursue legal action under tort law, and include suitable clauses or provisions in employment agreements and other business agreements that comply with local contract law.
In a similar vein, Indian courts have maintained trade secret protection under a number of statutes, including contract law, copyright law, equity principles, and the common law action of breach of confidence, despite the country's lack of a particular trade secrets law.
Contract Law
Parties desiring to safeguard trade secrets may enter into an agreement that includes a secrecy or non-disclosure clause. In India, an individual may be required by contract to keep confidential information disclosed to them private.
IT Law
Section 72 of the Information Technology Act 2000 offers specific protections as well, albeit these are restricted to electronic records.5
Owners of trade secrets may pursue the following remedies: compensation for any losses incurred as a result of trade secret disclosure; return of all proprietary and confidential information; and an injunction prohibiting a licensee, employee, vendor, or other party from disclosing a trade secret.6
Footnotes
1. Restatement (Third) Of Unfair Competition § 39 (1995).
2. AIR 1987 Delhi 372.
3. John Richard Brady And Ors v. Chemical Process Equipments P. Ltd. and Anr, AIR 1987 Delhi 372.
4. David E. Nevins, Trade Secrets – A Detailed Analysis of Domestic and Global Challenges (December 15, 2015).
5. The Information Technology Act, 2000, s. 72.
6. RNA Technology and IP Attorneys, Protecting trade secrets in India, Lexology (November 8, 2021, 07: 20 PM), https://www.lexology.com/library/detail.aspx?g=c83e8a6c-a02e-44ba-8723-94087d2e5e20.
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.
