1.

INTRODUCTION

Over the years, the importance of trade secret in the sphere of intellectual property has
increased to a level beyond protection through patents. It is universally important that the
information that is to be guarded as a trades secret must be kept secret. The extent to which such
fact or the information is known to the outside world, how much of such information is known to
the employees and the risk of having such information in the hands of competitors are the most
important factors to determine the trade secrets. In the present scenario, trade secrets protection is
fundamental to encourage innovative steps, foreign investment and to promote healthy
competition. Trade secret give the commerce a spirited edge over the competitors and therefore
one must ensure that he adequately protects his business related confidential information from his
competitor. Trade secret as a new form of intellectual property is very significant and it is garnering
wide importance because in the era of globalization, failure or success of any company depends
on its secrets let them be policies related secrets or information of their clients. In short, trade
secret law is about the what and the how. The what is the subject matter that qualifies as a Trade
secret. The how is the method by which a misappropriator improperly acquire, used or disclosed
the trade secrets. The researcher proposes to emphasis on the need of the trade secret law in India.
2. CONCEPT OF TRADE SECRETS

Trade secret could be defined in various perspectives but in simple words trade secret is that
secret which can be in any form like a concept, an idea, a formula, a pattern, an instrument, a
design, a process, a progress, a tool, a techniques, a mechanism, a devise, etc. to protect business.
Trade secret provides advantage to any organization over their competitors who do not have that
information.

The Trade Related Aspects of Intellectual Property Rights (TRIPS) lays down three essential
conditions which are to be fulfilled by any information before it can be considered as a trade secret.
They are:

i. Such information must be secret, i.e., not generally known or readily accessible to persons
within the circles that normally deal with the kinds of information in question.
ii. The information must have commercial value because it is a secret and,
iii. The information must be the subject of reasonable steps by its owners to keep it secret.

In Ambiance India P. Ltd. v. Naveen Jain trade secret was defined as "a trade secret can be
formulae, technical know-how or a peculiar mode or method of business adopted by an employer
which is unknown to other".
3. POSITION OF TRADE SECRETS IN INDIA

Trade Secrets seems to be a neglected field in India, as there is no enactment or policy

framework for the protection of trade secrets. This form of intellectual property is a new entrant in
India, but is nevertheless a very important field of IP. Protection of trade secrets is a very important
and one of the most challenging tasks for the Indian government as this will enhance the foreign
investment in India giving boost to the Indian economy. Foreign investors have to be assured of
the protection of their trade secrets, so that they can do business with our country. A proper policy
for trade secret protection will further enhance the security in our own industry. Almost all the
countries in the world have a policy for the protection of trade secrets and India also being a
signatory to the TRIPS is under an obligation to amend its laws or create a new law in order to
safeguard the trade secrets of various businesses. So a proper policy for the protection of trade
secrets in India is the need of the hour in order to provide a sense of security among the foreign
investors and the local businessmen regarding their trade secrets which will further boost the
Indian economy.

As mentioned above, in India, no substantive authoritative text or case laws are available to
determine the nature or ambit of trade secrets. But the Indian courts have tried putting the trade
secrets of various businesses under the purview of various other legislations in order to protect
them and also they have tried to define what a trade secret is in various cases, some of them are as
follows:-

1. American Express Bank Ltd. v. Ms. Priya Puri (2006) III LLJ 540(Del), Delhi High Court, in
this case defined trade secrets as formulae, technical know-how or a peculiar mode or method
of business adopted by an employer which is unknown to others.

2. Michael Heath Nathan Johnson v. Subhash Chandra and Ors 60(1995) DLT 757, and John
Richard Brady and Ors v. Chemical Process Equipments P. Ltd. and Anr (AIR 1987 Delhi 372)
took note of the contentions of the counsels who referred to English decisions to define trade
secrets

3. Mr. Anil Gupta and Anr. v. Mr. Kunal Dasgupta and Ors 97 (2002) DLT 257, the Delhi High
Court held that the concept developed and evolved by the plaintiff is the result of the work done
by the plaintiff upon material which may be available for the use of any body, but what makes it
confidential is the fact that the plaintiff has used his brain and thus produced a result in the shape
of a concept.

The legislations which are having a connection with the trade secrets can be summed up as
1. Copyright Act, 1957[Section 51, 55 and 63]
2. The Designs Act, 2000
3. The Information Technology Act, 2000[Section 65, 72]
4. Indian Penal Code [Section 408, 415]
5. The Indian Contract Act [Section 27]
6. The Competition Act, 2002 [Section 3]
7. Civil Procedure Code
8. Criminal Procedure Code

4. NEED FOR TRADE SECRET LAWS IN INDIA

More than ever before, business is driven by information. Indeed, continued success of a
business depends on how well it is able to protect key information from being copied or
otherwise used by competitors. Such information may relate to technical matters, internal
process, methodologies, techniques, training materials, software algorithms, etc. It could be a
unique way of handling and processing information that gives a company its competitive edge
over competitors. While it is difficult to define what type of information is confidential it is
without doubt vital that organisations protect such information, especially when, in the course
of routine business, it is shared with employees, business partners and others. Some trade
secrets have great economic value and they are kept confidential for long periods of time. For
example, the compositions of certain soft drinks or the ingredients that go into a popular brand
of fried chicken have been kept confidential and secret for many decades and those businesses
retain their competitive advantage mainly based on those retained trade secrets. Currently our
laws do not adequately protect confidential information that constitutes trade secrets. Trade
secrets that are shared in confidence with employees and business partners, may have a
economic value to their owner.
India has potential to become even bigger hub for innovation, research, clinical trials,
diagnostics and other advanced branches of science. But lack of adequate trade secret
protection law has impacted growth of these sectors as many foreign companies are reluctant
to engage in Indian entities. Where at one end India is accepting the intellectual property
rights, it is important that we go that extra mile and introduce trade secrets protection in the
country to provide the qualitative security the world today seeks.
5. RESEARCH QUESTIONS
Q1: What is the importance of Trade secrets in different Industries?
Q2: Whether the present legal system provides adequate protection to matters pertaining Trade
Secrets in India?
Q3: Whether India is ready to accept a law on Trade Secrets?

6. SCOPE OF RESEARCH

The aim of the research is understanding how a trade secret law would be a beneficial
legislation towards encouraging the growth of Industries in India. The scope of research is
limited to the Trade secret law repercussions in India only. No empirical data shall be collected.

7. TRADE SECRETS V. PATENTS

A patent is a set of rights provided by a government to the inventor, primarily the right to
exclude others from making and using the invention. Talk of trade secrets often brings up talk of
patents because both protect same types of information. Specifically, the owner of certain kinds of
information formulas, computer programs, manufacturing process, etc. has the option of
pursuing either trade secret or patent protection.

But the subject matter of patents and trade secrets is far from coextensive. While any
information can be a trade secret, patents cover a much narrower range of subject matter. Many
categories of trade secrets among them customer lists, financial information, HR data, and
business strategy are not eligible for patent protection. And even if the information is eligible for
both patent and trade secret protection, inventors can do things that preclude patent protection,
such as using or selling the invention more than one year before seeking patent protection.

Analyzing various differences between trade secret and patent law:

PATENTS TRADE SECRETS

Subject matter Invention of a process, Any information, provided the
machine, manufacture or other elements are satisfied.
composition of matter, or any
 new and useful improvement
thereof, provide the other
elements are satisfied.
Duration Typically 20 years from the Potentially indefinite
filing of an application
Must the information be Yes No
novel?
Must be the information be Yes No
nonobvious?

8. DOCTRINE OF PASSING OFF

A trade secret is described, as property though it is required to be differentiated from other real
or other personal property, as the possessor, in this case, is not confirmed with any special right to
use or enjoy. Therefore, if through accident or reverse engineering, the secret or information leaks
out, then law provides no remedy. The common law remedy is available in case of trade secrets
only when the secret or undisclosed information is lost through breach of contract or confidence.
If we apply the doctrine of passing off the position of law is not very clear and is definitely very
ambiguous.

9. TRADE SECRETS AND INSIDER TRADING

When trade secrets are misused for personal gain by trusted people of an organization it
becomes insider trading. It is very difficult that the cases of the insider trading are caught and
reported. Hence it is necessary that we protect the organization from its roots. By a legislation on
trade sectrets, the much needed impetus shall be provided and an honest environment will be
created.

10. CONCLUSION

Protection of trade secret has acquired great importance in the present scenario due to the
emergence of different circumstances where it is preferred over patent protection. Moreover, in
view of the policy of globalization by the government of India and the existing business
environment, trade secrets definitely needs specific legislation for its protection. Further, a specific
legislation acquires even more importance in the view of ambiguity that exist in the foreign
judgments and decisions on the issue of trade secret. No consistent line of principles has been laid
down for setting them persuasive precedent for Indian courts to follow.

Based on the feedback from the stakeholders, it appears that the time has become right for
upgrading the existing legal protection of the trade secrets taking care of the following proposals:

i. The proposed dispensation must contain all the possible provisions which are required to
protect the entities from violation of their trade secrets;
ii. The laws made should be in consistence with the existing laws and must foster the
business of the companies;
iii. The anti-competent factors must be taken care of;
iv. A criminal liability should be imposed for the theft and misappropriation of trade secrets;
v. The laws made should protect the rights of the employers as well as the employees.

The top leadership of the country is also of the opinion that our national laws must align with
the international standards in respect of Intellectual Property Rights. With this it is expected that
the confidence of the international Community gets translated into investments in the business in
India. This fertile legal environment will also encourage burgeoning young entrepreneurs to
unleash their potential in rebuilding India and also to leave a stamp in the international arena.
However, further consensus maybe built stimulating a debate so that the emerging law not only
takes care of the present challenges but is capable of taking care of future challenges.

Submitted By:

Shreya Gupta and Apeksha Ostwal

ILS Law College, Pune