Trade secret law under IP law

Aligarh Muslim University

Faculty of Law
GCT - II
Intellectual property rights
Submitted to: Dr. Md. Zafar Mahfooz
Nomani

Author: Rajat Kumar Singh

Semester: VII sec: B
17BALLB 59
Group III
Enrollment No. – GI0465
Mail id: rajatkrsingh2311@gmail.com
Mob. No. 9568533357
Session-2020-21

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 TRADE SECRET LAW UNDER IP LAW

INTRODUCTION
Information that enjoys the confidence of the trader that it could give commercial advantage
would be kept secret for legal protection and enforcement. Secret information is commercially
useful since it could be industrially applied. The owner of the information intends to keep it
secret since it could bring commercial advantage to him. If the secret information is revealed it
could become commercial advantage to the competitors. Once the secret is revealed to others it
loses the luxury of being called and protected as a trade secret. A secret, which is made known to
others, becomes knowledge available in the public domain and no one can claim ownership over
it. Information is knowledge, information is power, and information is money. Information and
knowledge plays a vital role in the modern day life. Every day we use receive information, which
we may not intend to keep secret. But certain information, which could be gained only after
cumbersome intellectual efforts, or information which could be obtained only on the application
of human ingenuity needs to be kept secret for securing commercial advantage. Information kept
secret is valued and protected especially in the business world. Such sensitive information if
revealed will lose its value. The information may be pertaining to ones business, profession,
trade or occupation. As long as certain sensitive and confidential information is kept secret it
gains commercial advantage. Such secret information is commercially exploited and traded in
the business world. The success of a business is being increasingly driven by its confidential
information and knowledge, especially in a global environment. It is important that every
business policies and practices are poised to safeguard its confidential information from
inadvertent disclosure or misappropriation. A trade secret is information of any kind that is
valuable to its owner, not generally known, and is maintained in confidence by its owner. Trade
secrets can last forever, as long as they remain secrets and are protected as such. Only the
owner’s ability to enforce against misappropriation may vary. However, once disclosed, whether
accidentally or otherwise, their value to the business is irretrievably lost. Trade secret protection,
also can last indefinitely as long as the protected information continues to be kept in secrecy. It is
only with diligent effort to keep information secret that a trade secret becomes and remains a

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company’s intellectual property asset that is valuable and capable of being the subject of a
license.

‘TRADE SECRET’ DEFINED

Trade Secret is confidential information not generally known to others. A trade secret refers to
data or information relating to the business which is not generally known to the public and which
the owner reasonably attempts to keep secret and confidential. The information must derive
independent economic value, either actual or potential. The secret must give the holder a
competitive edge. English Law does not distinguish between various types of confidential
information or trade secret. Trade secret can be defined to mean information which has got
certain commercial value and which provides commercial advantage to the owner. Under the
TRIPS Agreement “trade secrets” are referred as “Undisclosed information”. Any information is
prevented from being disclosed so long as such information:

 is secret in the sense that it is not, as a body or in the precise configuration and assembly
of its components, generally known among or readily accessible to persons within the
circles that normally deal with the kind of information in question;
 has commercial value because it is secret; and
 has been subject to reasonable steps under the circumstances, by the person lawfully in
control of the information, to keep it secret.

Trade secrets can be either confidential technical information or business information and
broadly may include manufacturing processes, industrial designs, product formulas, sales and
advertising strategies, distribution methods, customer lists, computer algorithms, and the like. In
US under the Uniform Trade Secrets Act, trade secret has been defined to mean; information,
including a formula, pattern, compilation, program, device, method, technique, or process, that:

 derives independent economic value, actual or potential, from not being generally known
to and not being readily ascertainable by proper means by other persons who can obtain
economic value from its disclosure or use, and

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  is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy.”

Similarly, the Unfair Competition Law of China provides that “trade secret” means technical or
business information that is unknown to the public, is capable of bringing economic benefits to
the rights owner, has practical utility, and requires that the rights owner take measures to keep
that information secret. As long as certain information is kept confidential away from all others it
enjoys the status of trade secrets. Any information which could be sold and purchased in trade, a
secret, which could be traded, can be called as trade secret. Further the information must be new
and original in the sense the same information must not available with anybody and the
possessor of such information must the original owner of the information. In Coco v AN Clark
Engineers Ltd, it was held that the kind of information which will be protective must have the
necessary qualification of confidence in it, in the sense that it is not something which in public
property and public knowledge. In Hudson Hotels Corporation v Choice Hotels International the
second Circuit Court had held that “in our opinion, New York law dictates that an idea, whether
embodied in a product and called a trade secret or otherwise reduced to concrete form, must
demonstrate novelty and originality to be protectable as a property right under any cause of
action for its unauthorized use. The commercial element in secrets makes it tradable and the
element of secrecy makes it trade secret. In the spear of trade commerce and industry, there
would always be certain knowledge, information which is sensitive, confidential and
commercially viable which could provide advantage to the possessor. Such knowledge or
information is always sought after for trade and purchase or for economic value. A trade secret
may consist of any formula, pattern, device or compilation of information which is used in one’s
business, and which gives him an opportunity to obtain an advantage over competitors who do
not know or use it. But tremendous demand for personal computers has created a vast and
extremely profitable market for software producers which has fuelled the idea of protecting
software products under trade secrets regime. This new market is essentially a consumer market
in which a large volume of programs are sold through mail order businesses and retail stores. Mr
Anil Gupta v Mr Kunal Dasgupta, the Delhi High Court deliberating on this pertinent issue it
was 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 anybody, but what makes it

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confidential is the fact that the plaintiff has used his brain and thus produced a result in the shape
of a concept. While American Express Bank Ltd v Ms Priya Puri, the court defined trade secret
as formulae, technical knowhow or peculiar mode or method of business adopted by an employer
which is unknown to others.” The Delhi High Court in American Express Bank Ltd v Priya Puri,
defined trade secret as formulae, technical know-how or a method of business adopted by an
employer which is unknown to others and such information has reasonable impact on
organizational expansion and economic interests. Indian courts have approached trade secrets
protection on the basis of principles of equity, action of breach of confidence and contractual
obligations. The recent Indian Innovation Bill attempts to define “confidential information” to
mean information, including a formula, pattern, compilation, program device, method, technique
or process, that:

 Is secret, in the sense that it is not, as a body or in the precise configuration and assembly
of its components, generally known among or readily accessible to persons within circles
that normally deal with the kind of information in question;
 Has commercial value because it is secret and
 Has been subject to responsible steps under the circumstances by the person lawfully in
control of the information, to keep it secret.

ESSENTIALS OF ‘TRADE SECRET’

There are certain essential features which a trade secret must possess to be considered as a trade
secret. To be able to get protection, there are certain requirements to be satisfied, which form
essential ingredients of trade secrets. Unlike other forms of intellectual property, trade secrets are
essentially internal instruments. In Bombay Dyeing & Manufacturing Co Ltd v Mehar Karan
Singh, it was viewed that; it is the information which includes formula, pattern, compilation,
programme, device, method, technique, or process, that derives independent economic value
from not being generally known or readily ascertainable. The responsibility for their protection is
in the hands of the owner of the trade secret if they are kept confidential. Most famous example
of trade secret is the coca-cola formula. This formula is kept locked in a bank vault in Atlanta,
can be opened only by a resolution of the company’s board and is known to only two employees
at the same time. The public has no access to the name of those employees and they are not

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allowed to fly on the same air plane. It is important to bear in mind that a trade secret need not be
something that is novel nor should it have any real or intrinsic value to be protected. The only
important requirement is that it must be a secret. Irrespective of kind of protection either under
common law or under legislative mechanism certain features would make the essence of a trade
secret. A trade secret must fulfill the following essential conditions:

 Known only by a limited number people or employees or limited circle of access. The
information must only be known by a restricted circle of persons outside the business. It
is not known to the public, which means that the information cannot be directly acquired
from public channels and should meet two specific conditions: the information is “not
known to the public” and is “not readily accessible.”
 Kept secret or the owner has taken reasonable steps to keep it secret. In other words, to be
considered a trade secret, the information must be in fact a secret. The rights holder must
have taken measures to keep the information secret, including signing confidentiality
agreements, establishing confidentiality systems, and taking other reasonable measures to
maintain the confidentiality of the information.

 The information or knowledge is scientific, technical, related to useful arts or business.

Mere knowledge that is known among persons in the industry cannot be appropriated as
a trade secret.

 The information should be difficult to acquire by outsiders. The information must be

scarce and not publicly available or must not be easily available or difficult to acquire. 3

 Information shall have commercial value or utility or capable of being applied

industrially. The information must have a value for the business and its competitors. It
should bring economic benefits to the rights owner and has practical utility4 while
providing the owner a commercial advantage or competitive edge over competitors.

Therefore, the determination of the existence of a trade secret depends on the examination of the
facts of each particular case and identifying the various definitional elements 5 required for the
finding of a trade secret. These trade secrets loose commercial value one’s revealed or made
known to others. A method of conducting business or a manufacturing process or a formula

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could become trade secret when kept secret. Everyone who holds or owns such sensitive and
commercial information intends to keep it secret in order to gain competitive edge in their
respective business. The following are the examples of trade secrets;

 Formulas for chemicals, drugs, cosmetics, foods, etcetera, mathematical formulae 1

 Industrial processus and manufacturing techniques
 Technical and scientific information relating to the practical application of patented or
unpatented inventions.
 Plans, sketches, diagrams and blueprints, such as for a building or machinery.
 Computer software, Source code and algorithms to the extent it cannot be reverse
engineered.
 Sources of supply, pricing information, identity of vendors or suppliers, and customer
lists.
 Commercial records, such as customer lists, sales information, strategy and information
about commercial plans.
 Unpublished copyright works
 Marketing techniques, procedures and price lists.

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