This article has been written by Ms.B.S.S.Sridevi , a 4th year student of Damodaram Sanjivayya National Law University.
Trade Secret Laws in India
Trade secret is something which is very valuable to a company and which is essential for a company to run. Usually there are various competitors in a market for one single product and every single company wants people to buy their products only. In order for the people to recognize the same and to buy them repeatedly, all the companies have their own uniqueness or an element which is inseparable and this becomes the most valuable asset to the company. At any cost these secrets are to be kept only with the company and not be revealed to any other person and these are called trade secrets. Trade secrets are very confidential and any employee who knows or who is aware of them have to maintain the secrecy and is bound to be loyal to the company. It must be a secret and should have some commercial value. A formula or a pattern which is not known to anyone and which has a value for being maintained as a secret and without which a company can not run is usually termed as a trade secret.
LAWS IN INDIA :
First of such laws came into existence in United States of America by the way of enactment of a law called Uniform Trade Secrets Act which define what a trade secrets is and how such laws are protected and the claims which can be made if such secrets are revealed. United States of America law is a guide to all the other countries and paved a path for introduction of such laws.
There are no specific laws which govern the trade secrets in India and there are several provisions in several acts which help us in protecting the trade secrets which can be observed in Contract law, 1872, Information Technology Act,2000 and Indian Penal Code, 1860. They can also be seen through Non Disclosure Agreements which are signed by the employees in favour of the employer so that when they retire or are removed from such position in a company where they are aware of the trade secrets do not disclose such information to any other people and do not misuse the information. It is their responsibility not to disclose such information and maintaining trust is very important. Indian courts have usually adopted the principles of equity and several common law remedies which are like breach of contract and maintenance of confidentiality in order to solve the cases.
There is another provision in Indian Contract Law,1972 which says that agreements in restraint of trade are void. Though the agreements in restraint of trade are void no one has a power to disclose such information or to use such formula which is unique and used by already existing company. Whenever an employee who knows the confidential information is leaving such a company or wants to retire then they are asked to sign on the Non Disclosure Agreement(NDA) which will enable the employee to work wherever he wants and at the same time protects the interest of the firm. NDA agreements are binding in nature and they are created to ensure the confidentiality between the employers and employees. As per Article 19(1)(g) no one is restrained from practising any business, occupation or trade. Every business has a unique trade secret and there is no wrong in creating such agreements.
In Tata Motors Limited & Anr v State of Bengal ,the High Court of Kolkata in defining the term ‘trade secret’ took the definition which was in Black’s Law Dictionary and gave a definition to the term trade secret as “a formula, process, device or other business information that is kept confidential to maintain an advantage over competitors. The information includes a formula, pattern, compilation, programme, device, method, technique or process- that derives independent economic value, actual or potential, from not being generally known or readily ascertainable by others who can obtain economic value from its disclosure or use; and that is the subject of reasonable efforts, under the circumstances, to maintain its secrecy.”
In the case of Richard Brady v. Chemical Process Equipment Pvt. Ltd . , the Delhi High Court gave a judgment saying that the information which is made with the clients and stored also comes under copyrighted material under the Copyright Act, 1957 which implies that trade secrets are to be protected at any cost and such is regarded as confidential agreement which have to be maintained in a most secret way. Non Disclosure Agreements and Agreements in restraint of trade are examples of restrictive agreements.
In Burlington Home Shopping Pvt. Ltd. v Rajnish Chibber, the Delhi High Court was put in such a situation where it had to provide for interim relief for a suit which has been filed by a mail order service company against an employee seeking an injunction prohibiting “breach of copyright and confidentiality.” The Court declared that the segregation of the addresses is literary work which consumes time and which requires money and hard work in order to bring out proper shape to such a work and the one who authors such work is entitled for copyright. Copyright law and trade secret law are covers all the works which are related to the compilation of data. Both the trade secret law and copyright law are to be read together in order to give such kind of judgments.
Apart from the Contract law it is pertinent to note that the observation of trade secret laws have been included in laws like Information Technology Act, 2000, the Indian Penal Code, the Securities Exchange Board of India Act, 1992, the Code of Civil Procedure.
Information Technology Act, 2000 – As per Section 43A of this Act, it provides for compensation if there is any wrongful use or wrongful gain which is being caused from the information which is held by a confidential entity. It is the duty of such holder to protect such information.
As per Section 72 of the Information Technology Act, 2000 there is a compensation which is awarded if there is any breach or misuse of the information and secrecy of the company.
Indian Penal Code also provides for provisions which pertain to breach of trust and there are various documents which have to be submitted as per the provisions of the Code of Civil Procedure which are very important and help the court in coming to a conclusion. There is a particular Regulation in the Securities Exchange Board of India Act which prohibits the Insider Trading and punishes anyone who misuses such information for personal gain.
Licensing Trade Secrets
There can be another form of contracts in which the owner of trade secret can sell such a technique or secret to any person for monetary consideration and he can also specify the conditions in which such information can be disclosed to a third party. These are all protected agreements and they are usually done for financial gains by the people. This is an innovative way of use of information. Unrestricted power of disclosure is never given to any person. Even though there is license it is essential that there must be negotiations at initial stage which can help us protect the trade secrets in a more organized way.
Conclusion :
Usually all the perpetrators tend to use this information because to create such a same product or technique which becomes so popular takes a lot of time and it is very easy if such a technique is copied. In order to curb the exploitation of information and wrongful gain of information it is important for the Government to bring a special law which especially focuses on the trade secrets. As India is a signatory of TRIPS Agreement which empowers it to make laws relating to trade secrets. A special legislation has to be formed which focuses on such protection and main focus must be on the Non Disclosure Agreements and various countries legislation’s must be taken into consideration. It’s high time that India takes a step to form such a law.
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