Author- Shailja Choudhary
Introduction
One of the main problems that businesses have in the modern day is keeping sensitive information secret due to the prevalence of digital media and the simplicity with which information can be shared, copied, and stored. Every piece of IP that a company creates is important in its way. Among these are the venture’s trade secrets, which are the primary source of its success.
What Is a Trade Secret?
Any internal company procedure that is kept hidden from those who are not employed by the company is considered a trade secret. A trade secret is a proprietary business strategy, formula, process, or formula that provides an economic advantage to its owner. Confidential business information is protected by trade secret IP rights, which can be licensed or sold.
North American Free Trade Agreement (NAFTA) defines a trade secret as “knowledge having commercial value that is not in the public domain and for which reasonable steps have been taken to safeguard its secrecy”[1]. The court determined that a trade secret is a knowledge that would seriously hurt the owner if it were exposed to a competitor in Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber[2]. Not only may it contain product-making formulas, but also, if necessary, client names and the things they’ve purchased, this kind of database can be quite useful.
What are the requirements to qualify as a valid trade secret?
Article 39(2) of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)[3] outlines the requirements for information to be considered a trade secret, including that it:
- be confidential and therefore commercially valuable;
- be known exclusively to a small group of people; and
- Must be protected by the lawful owner’s reasonable precautions, such as the use of confidentiality agreements with business associates and workers.
It is considered unfair and a violation of trade secret protection for a third party to acquire, use, or disclose such secret knowledge in a manner that is inconsistent with honest commercial practices.
What kind of information is protected by trade secrets?
A trade secret might be anything that is not publicly known about a business yet gives it an advantage in the marketplace. Manufacturing techniques, research data, and software algorithms are all examples of technical trade secrets, whereas distribution channels, customer databases, and marketing approaches are all examples of commercial trade secrets.
A trade secret can consist of components that, individually, are not protected by confidentiality obligations but which, when combined, create an advantage over the competition and hence warrant protection.
In addition to financial data, formulas, recipes, and even source code, many more types of knowledge could be considered trade secrets.
Trade secrets can take numerous forms, both visible and invisible. Google’s search algorithm, for instance, is protected as intellectual property in code and is changed periodically to ensure its continued success.
For instance, KFC’s “Original Recipe” a secret combination of 11 herbs and spices created by Colonel Sanders in 1940, is one of the most closely guarded trade secrets in the business. The secret recipe has been written down and is currently kept in a safe in Kentucky, while the information around it is shielded by various legal mechanisms, including Non-Disclosure Agreements and Confidentiality Clauses.
Coca-Cola’s secret recipe (perhaps the most well-known trade secret in the world) is held in a bank vault that can only be unlocked by a resolution of the Coca-Cola Company’s board of directors. The recipe is known only by two Coca-Cola employees at a time, and neither of them is allowed to fly on the same plane or reveal their identities to the public. Coke’s recipe for their famous soft drink, the “secret formula,” is an example of a trade secret in the form of a formula or recipe. The secret has never been shared because it has not been patented.
One example of a process trade secret is the New York Times Best Sellers list. The list isn’t just based on sales figures, even though book sales were taken into account by adding up the numbers from the chain and small bookstores as well as wholesalers (books with lower overall sales may make the list while a book with higher sales may not).
What laws can a business enforce to secure trade secrets?
Theft or disclosure of trade secrets is illegal in all 50 states. Trade secret law, interestingly enough, is typically handled at the state level. Nonetheless, except in New York and Massachusetts, USTA has been adopted in every state. Trade-related Aspects of Intellectual Property (TRIPS), the General Agreement on Tariffs and Trade (GATT), and the North American Free Trade Agreement (NAFTA) are three international agreements that can be used to track the history of trade secret protection.
The Uniform Trade Secrets Act serves as the basis for the vast majority of these regulations. The Uniform Trade Secrets Act (UTSA) was passed to standardize trade secret protection across the United States. Similarities exist between the language of USTA and TRIPS, and between USTA and state statutes that have adopted it. The World Trade Organization (WTO) administers an international agreement called the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which establishes baseline requirements for various forms of IP legislation as they apply to the citizens of other WTO Members.
Means to protect trade secrets in India
Traditional judicial judgments, as well as statutes and features of equitable law, Contracts law, and Torts, are the only sources of protection for trade secrets in India. Judicial pronouncements have always attempted to advance and safeguard trade secrets and give recourse to a breach of confidentiality despite the absence of trade secret legislation, which has made judgments difficult.
Even though India does not have a law that explicitly protects trade secrets, there are laws in place that do several things to ensure their confidentiality. Many Indian judicial bodies have upheld the secrecy of trade secrets based on other laws, including Contract law, principles of equity, the common law action of breach of confidence (which is essentially a breach of an agreement to keep a piece of information secret), and Copyright law. Electronic records containing sensitive information are afforded additional legal safeguards according to provisions established by the Information Technology Act of 2000[4].
As a matter of contract law, one may be legally prevented from divulging certain facts. Non-disclosure agreements (NDAs), for instance, are the most widely used mechanism for securing the secrecy of business information. Confidential information is that which is not to be shared with third parties and should be identified in detail in an NDA. The third-party may be dissuaded from spilling the beans by the severe penalties outlined for breaching the NDA.
There is an agreement on trade-related aspects of intellectual property rights that India has signed (TRIPs). Article 39(2)[5] of TRIPs gives members leeway to draught legislation protecting against the unauthorized disclosure and use of certain types of information.
Conclusion
The necessity to protect confidential information is expanding as the globe becomes increasingly interconnected digitally. Notwithstanding the limited scope of trade secret protection in India, businesses of varying sizes and in a wide variety of industries have been able to secure and capitalize on their unique selling propositions (USPs) at crucial junctures, helping to solidify India’s position in the global marketplace. The Indian economy has been described as “mixed” from its inception, but it is gradually becoming a capitalist one as a result of variables such as FDI, inflation, and population growth. All market participants in such a precarious setting will look for ways to bolster their strategy through creative IP deployment. In the same vein, the need of safeguarding trade secrets is only going to grow.
[1] North American Free Trade Agreement, 1994
[2] Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber ,1995 PTC (15) 278
[3] Article 39(2), Trade-Related Aspects of Intellectual Property Rights
[4] Information Technology Act, 2000
[5] Supra n.3.
