INTRODUCTION

Under a system of free market economy where competition is more, every trader looks forward
to obtain confidential information of his rivals not only to capture more market but also to
eliminate his rivals from the market, if necessary. Therefore, traders are very careful and impart
their trade related confidential information to only some responsible employees for the purpose
of trade. Others are not allowed to access such information.

QUESTION 1

WHAT IS TRADE SECRET? CAN TRADE SECRET BE REGISTERED, IF YES THEN

UNDER WHICH IP ACT AND IF NO THEN WHY?

ANSWER:

I. Trade Secret -- Trade secret is confidential information of a business or enterprise. A

trade secret is any information that can be used in the operation of a business or other
enterprise and that is sufficiently valuable to afford an actual or potential economic
advantage over others. The protection of secret business information, such as the
ingredients in a perfume, a date back to Roman law but is mainly a nineteenth - century
legal response to the technical knowledge and employee mobility of the Industrial
Revolution.

Trade secret must not be something which is public property or public knowledge. In Saltman
Engineering Co. Ltd. v. Campbell Engineering Co. Ltd1, the court held:

1
[(1948) 65 RPC 203, C. A.]
 It is perfectly possible to have 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. 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.

According to World Intellectual Property Organization (WIPO):

A trade secret is information of any type that is actually or potentially valuable to its owner and
not generally known or readily ascertainable by the public, and which the owner has made a
reasonable effort to keep secret. A trade secret generally has some cost associated with its
development, and is not common knowledge in the industry. Even negative information, such as
research options that have been explored and found worthless can be a trade secret. Practically
any type of technical and business information can be protected as a trade secret provided that it
meets these requirements.2

Kinds of Trade Secrets

Trade Secrets are mainly of two kinds:

a) Technical secrets which are related to manufacture or improvement of quality of goods or

conduct of services and which include secret process for manufacturing specific products,
the secret formulae or the design of product, know how etc.;

b) Business secrets which are administrative and strategic in nature and develop internally,
such as cost and pricing data, sales statistics, list of customers and suppliers, market
projections, expansion plans etc. These two secrets are in fact two pillars on which a
trade develops.

Factors to Consider the Nature of Trade Secret

2
[WIPO, Trade Secrets are Gold Nuggets: Protect Them, WIPO Magazine, Geneva, Number 4, April 2002, p. 13]
Following six factors may be considered to determine whether information owned by an
enterprise is a trade secret. These are:

i. The extent to which the information is known outside the enterprise;

ii. The extent to which the information is known by employees and others involved in the
enterprise;

iii. The extent of measures taken by the enterprise to guard the secrecy of the information;

iv. The value of the information to the enterprise and to competitors;

v. The expenditures incurred by the enterprise in terms of time, money and efforts in
developing the information; and

vi. The ease or difficulty with which the information could be properly acquired or
duplicated by others.3

II. Registrability of Trade Secrets—

Contrary to patents, trade secrets are protected without registration, that is, trade secrets are
protected without any procedural formalities. Consequently, a trade secret can be protected for
an unlimited period of time. 4
.
There is no specific IP legislation expressly providing for registration of trade secret. However,
in some cases where trade secret is part of a patentable invention, it can be registered by way of

3
[K. V. Swaminathan, Trade Secrets in A. K. Koul and V. K. Ahuja, (ed.), The Law of Intellectual Property Rights; In
Prospect and Retrospect (Delhi 2001), p. 275]
4
[ How are Trade Secrets Protected??, retrieved from
https://www.wipo.int/sme/en/ip_business/trade_secrets/protection.htm]
patent registration. The non- availability of specific trade secret legislation does not mean that it
can't be protected or it is unprotect able. In fact we have protected multiple trade secrets since
decades. For example, Coca-Cola’s formula for its aerated drinks and KFC’s recipe for its
delicious fried chicken are considered to be trade secrets which have been preserved for many
decades.

QUESTION 2

NAME 5 TRADE SECRETS.

ANSWER:

Following are the examples of trade secrets:

i) Blueprints and maps;

ii) Data compilations such as list of customers and/or suppliers;

iii) Algorithms and processes that are implemented in computer programs and the
programs themselves;

iv) Information about research and development (R & D) activities; and

v) Formulae for producing products.

In Hi- Tech Systems & Services Ltd. v. Suprabhat Ray5, the court observed that "a trade secret or
business secret may relate to financial arrangement, the customer list of a trader. Business
information such as cost and pricing, projected capital investments, inventory marketing
strategies and customer's list may qualify as his trade secrets."

QUESTION 3

CAN UNDER ANY OTHER ACT TRADE SECRET BE PROTECTED?

ANSWER:

Although there is no specific legislation in India to protect trade secrets and confidential
information Indian courts have upheld trade secret protection on basis of principles of equity,
and at times, upon a common law action of breach of confidence, which in effect amounts a
breach of contractual obligation. Section 72 of the Information Technology Act 2000 also
provides certain protection, although this is limited to electronic records.

In order to protect trade secrets, the jurisdictional bases of the action of breach of confidence can
be broadly classified into following categories:

I) Contract -

The obligation to protect confidential information may be incorporated in a contract

either in express or implied terms. The express contractual obligation with respect to the

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[2015 (63) PTC 479 (Cal), p. 492]
confidential information makes the recipient of the information liable, if he breaches his
obligations. The contractual obligation as to confidential information may arise out of implied
terms of contract. The implied term may be considered to exist if it is understood that the
obligation is essential to the execution of the contract, without which the contract would be
ineffective. By this way one can resort to law of contract for protection of his trade secret.

II) Tort –

Relying upon tort, the confider can take action against third party who wrongfully
acquires his information in prejudice to his benefits. The jurisdiction under the law of tort may
also be invoked where it appears that the third party has induced the receiver of information to
breach his contractual obligation with respect to the confidence.

III) Equity –

The jurisdiction on the basis of contractual obligation cannot be invoked against third
party because according to the principle of privity of contract, the confider cannot take action
against the outsider of the contract who obtains the confidential information from a contracting
party. To deal with such situations, equity comes in to provide justice to the parties who deserve
it. The law on confidence is, therefore, based on the broad principle of equity that he who
receives information in confidence should not take unfair advantage of it by using it to the
prejudice of the person who imparts it.

In addition to this, the owner of confidential information may also have a common law
right of property against the person who in bad faith collected the information from him.

The remedies available in case of trade secret infringement resulting from breach of
confidential information are almost same as are available for infringement of other IP rights. The
remedies are:
 i. Injunction-- an injunction preventing a licensee, employee, vendor or other party from
disclosing a trade secret;

ii. Delivery up or destruction-- The return of all confidential and proprietary information.
The court may order the defendant to deliver the articles or to destroy them in which the
defendant had used such information of the plaintiff in breach of confidence. Both of the
remedies are equitable one and therefore, are discretionary in nature; and

iii. Damages-- Compensation for any losses suffered due to the disclosure of trade secrets.

iv. Account of profits-- The remedy of account of profits is available to the plaintiff where
the information has been exploited commercially by defendant in breach of confidence.
The remedy of account of profit is not available in addition to damages. It is an
alternative remedy and discretionary.

CONCLUSION

At present, Indian trade secrets law is a judiciary-made law, based on the principle of equity and
common law actions against breach of confidence, with the jurisprudence as a whole revolving
around an employee’s obligations and duties towards the employer regarding confidential
information gained during the course of employment. Indian jurisprudence regarding trade
secrets is unclear on a number of important aspects, including:

a) The scope of damages in the case of a breach of confidential information;

b) Theft of trade secrets by business competitors; and

c) Procedural safeguards during court litigation.

 Further, in the absence of a specific trade secrets law, the courts have ruled in favour of the
proprietor of information as literary work as defined under copyright law.

The recent creation of the National IP Rights Policy has raised hopes for the enactment of
a trade secrets law, since this is one of the objectives of the policy. Although no timeframe has
been provided for the achievement of this objective, one can be certain that there will be a trade
secrets law in the near future.