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Protection of Trade Secrets Under Indian Law

As a signatory of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs), India is obligated to protect undisclosed information.(1) However, since Member States are allowed to have a sui generis mechanism in place as provided under Article 10bis of the Paris Convention and Articles 39(2) and 39(3), Indian Courts have preferred to apply common law principles to protect such information. India does not have a specific codified legislation to protect Trade Secrets.

In lieu of a statute, Trade Secrets are capable of being considered within the framework of contract, competition and intellectual property laws simultaneously. They can be protected by way of restrictive covenants, non-disclosure agreements and other contractual means. Additionally, Trade Secrets can also be protected by an action against misappropriation under common law, wherein misappropriation of trade secrets may occur by way of breach of an obligation of confidence, whether arising impliedly or expressly, as well as theft.

In true common law tradition, Indian courts have preferred to construe "trade secrets" as equitable rights, without likening them to absolute property rights.

Trade Secrets are, however, recognized by Courts as a class of information capable of being protected, and are often considered alongside other types of such information, including know-how and confidential information. In the absence of any codified law, trade secret disputes receive varied treatment by Courts depending on the facts and circumstances of the dispute.

The jurisprudence on Trade Secrets in India has developed rapidly since the 1990s owing to the liberalization of the Indian economy and a significant increase in creation of intellectual property having financial implications on businesses. (2) Consequently, the change in the economic climate was also responsible for bringing disputes before Indian courts. Such disputes were the breaking ground for an understanding behind the classification of information, especially in its intangible form and the circumstances in which such information is required to be protected.

Information has been broadly classified as confidential or public. Confidential information can be further classified as being a trade secret, government, personal or as know-how.
As defined in the Black's Law Dictionary, (3) "trade secret" is a "formula, process, device, or other business information that is kept confidential to maintain an advantage over competitors; information including a formula, pattern, compilation, program, device, method, technique or process:
(1) 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;
(2) That is the subject of reasonable efforts, under the circumstances, to maintain its secrecy."

This definition has been relied on by the Calcutta High Court in Tata Motors Limited v State of West Bengal.(4)

In the leading Indian case of Konrad Wiedemann GmbH v. Standard Castings Pvt. Ltd., (5)
relied heavily on Lord Green's observations in the Saltman case, (6)

Lord Green stated:
"The information to be confidential must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. On the other hand, it is perfectly possible to have a confidential document, be it a formula, a plan, a sketch or something of that kind, which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process."

In the case of Indian Farmers Fertilizer v. Commissioner of Central Excise, (7) the Customs, Excise and Gold Tribunal, Delhi defined Trade Secrets in the following manner: "A trade secret is such sort of information, which is not generally known to the relevant portion of the public, that confers some sort of economic benefit on its holder and which is the subject of reasonable efforts to maintain its secrecy."

This criterion has evolved over time and as recently as 2010, the Hon'ble High Court of Bombay, in the matter of Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh, (8) laid down the following factors for information to be classified as a Trade Secret:

(1) The extent to which the information is known outside the business;
(2) The extent to which it is known to those inside the business, i.e., by employees;
(3) The precautions taken by the holder of the trade secret to guard the secrecy;
(4) The savings affected and the value to the holder in having the information as against competitors;
(5) The amount of effort or money expended in obtaining and developing the information; and
(6) The amount of time and expense it would take others to acquire and duplicate the information.

It is settled law that the quality of confidentiality makes information eligible for legal protection as a Trade Secret. If reasonable efforts are not expended by owners of such confidential information to maintain secrecy or if such efforts cannot be proved, owners of such information risk losing the quality of confidence even if such information is obtained by third parties without permission. (9)

Even in the absence of a unified legislation formally recognizing or defining "Trade Secrets," the protection for confidential information is extensive in India. The following statutory provisions recognize and protect different types of confidential information:

(1) Section 27 of the Indian Contract Act bars any person from disclosing any information which he acquires as a result of a contract.

(2) Section 72 of the Information Technology Act provides for criminal remedies, whereby a person may be punished with imprisonment for a term along with a fine in case he is found to have secured access to any electronic record, book, register, information document, or other material without the consent of the person concerned and such first person discloses such information further.

(3) In 2009, the Information Technology Act, under Section 43A provided for "Compensation for failure to protect sensitive personal data." Sensitive personal data is further defined in the rules promulgated under this Act and include passwords, financial data, biometric data etc.

(4) The Securities Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, renders the use and disclosure of confidential information by an insider subject to prosecution under the Securities Exchange Board of India Act.

(5) The Copyright (Amendment) Act, 2012, under Section 65A has provided for criminal remedies for circumvention of technological measures implemented for the protection of works in which copyright subsists, especially if such act is done with the intention of infringing the copyright in such works. Furthermore, under Section 65B of the same Act there is a criminal penalty for unauthorized access and alteration of rights management information, usually maintained through online contracts regulating digital rights.

1 Article 39, Agreement on Trade Related Aspects of Intellectual Property Rights.
2 Mr. Sunil Mani, UNESCO Science Chapter, India.
3 Black's Law Dictionary, 8TH Edn. 1133.
4 Tata Motors Limited & Anr. vs. State of Bengal, G.A. No. 3876 of 2008 in W.P. No. 1773 of 2008.
5 Konrad Wiedemann GmbH vs. Standard Castings Pvt. Ltd, [1985](10) IPLR 243.
6 Saltman Eng'g Co. Ltd. vs. Campbell Eng'g Co. Ltd., [1948] 65 RPC 203.
7 Indian Farmers Fertilizer vs. Commissioner of Central Excise, 2007 (116) ECC 95.
8 Bombay Dyeing and Manufacturing Co. Ltd. vs. Mehar Karan Singh, 2010 (112) BomLR375.
9 Emergent Genetics India Pvt. Ltd. vs. Shailendra Shivam, Suit No. 50/2004, High Court of Delhi.

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