Trade

Can Trade Secrets Be Protected In India?

calendar16 Feb, 2023
timeReading Time: 5 Minutes
Can Trade Secrets Be Protected In India?

Business typically collects and applies creative and original ideas that are unknown to their competitors in order to obtain an advantage and maintain the uniqueness of their products and services. The U.S. was the first country to grant legal protection to data exclusivity under the Uniform Trade Secrets in 1985, and it has pursued it vigorously since then. The purpose of the U.S. Act is to standardize trade secret law. While information is valuable to any organization, trade secrets are often essential for the company’s survival. Because of the commercial relevance of a trade secret to any business, legal protection of such information is required.

What Do You Mean By Trade Secrets?

A trade secret is a type of confidential business information that gives the owner an advantage over competitors. It can be a formula, method, procedure, design, instrument, pattern, or commercial method of compilation of information that needs to be more widely known and easily ascertainable. A trade secret can be valuable because it gives the owner an advantage in the market, but it also must be kept a secret continuously in order to retain its value. Trade secret, unlike other types of intellectual property, such as patents or copyrights, do not have a finite lifespan as long as the information remains confidential and protected.

It is crucial for businesses to preserve their trade secrets since unauthorized disclosure can cause severe harm to the business and its competitive position. Trade secret protection is essential for the business to remain competitive and maintain its innovative edge in the continuously changing industry.

Importance of Trade Secrets 

The following are the importance of trade secrets:

  1. Competitive Advantages
  2. Maintaining Market Position 
  3. Innovation And R&D
  4. Protecting the Company’s Image
  5. Legal Protection
  6. Attracting Investment
  7. Enhancing Financial Value

Importance of Confidentiality in Protecting Trade Secrets

In India, confidentiality is essential for preserving trade secret. A trade secret is a valuable piece of information that gives a business an advantage in the market. To maintain its value, the information must be kept confidential, and any authorized disclosure or use of the information can result in substantial losses for the business.

If the information becomes generally known, it loses its competitive advantage and ceases to be a trade secret. Businesses must develop stringent internal policies and procedures which ensure that the trade secrets are kept confidential in order to maintain their secrecy. Implementing suitable storage and access restrictions, training staff on confidentiality requirements and engaging in non-disclosure agreements with employees, contractors, and business partners are all examples of what this entails. Businesses can guarantee their competitive edge and protect their valuable information from potential theft and misuse by maintaining the confidentiality of their trade secrets. 

Relevant Laws for Trade Secret Protection 

The Trade secret can be protected in India. The legal framework in India for trade secret protection is made of several laws and regulations that seek to protect confidential information and business practices. These are not protected under a specific single piece of legislation; rather, it is protected under a combination of laws, including the Indian Contracts Act of 1872, the Indian Penal Code of 1860, the Information Technology Act of 2000[1] and the Securities & Exchange Board of India Act, 1992. The international standard for trade secret laws was established Article10 (b) of the Paris Convention and Articles 39(2) and 39(3) of the TRIPS Agreement, 1995

  • Indian Contracts Act, 1872 

Contracts, particularly non-disclosure agreements used by businesses to protect trade secret, are governed under the Indian contract Act. The legislation establishes the fundamental principles of contract law in India and provides for remedies in the event of a breach of contract. Non-disclosure agreements, in particular, serve an essential role in trade secret protection since they impose confidentiality requirements on workers, contractors and other third parties that have access to confidential information. As per section 27 of the Contract Act of 1872, agreements must be formed in such a way that it protects both the business’s privacy and permits the employee to practice his chosen profession.

  • Indian Penal Code, 1860

The Indian Penal Code imposes criminal penalties for theft and unlawful use of trade secret. Section 405 of the IPC, for example, deals with criminal breach of trust, which includes misuse of such secrets. Section 420 of the IPC addresses cheating, which includes the unauthorized use of such Trade. 

  • Information Technology Act, 2000

The act also includes remedies for unlawful access to or use of trade secret kept electronically. The section 72 of the Information Technology Act, 2000 establishes criminal liability for violation of confidentiality and trust.

  • Securities & Exchange Board of India Act, 1992

According to SEBI Act, anyone who has material, non-public information about a business, its securities or its financial situations must keep that information confidential and not exploit it for personal gain or share it with others. This provision aids in the prevention of unauthorized disclosure of trade secrets such as corporate plans, financial performances and other sensitive information. SEBI also has the authority to investigate and prosecute individuals and corporations who participate in insider training or misuse of confidential information.

Trade secret protection varies from other forms of intellectual property protection in India since trade secrets are protected through confidential information and contracts rather than registration. Unlike patents, which mandate public disclosure of the innovation, trade secrets are kept confidential and are safeguarded by contracts and confidential relationshipsIn India, information must be certain conditions to qualify as a trade secret, including that it must:

  1. Have commercial value since it is not widely known
  2. Be subjective to reasonable attempts to maintain its confidentiality
  3. Have been obtained lawfully

If these criteria are met, information such as client lists, production techniques, and business plans can be qualified as trade secrets. In Burlington Home Shopping Pvt Ltd v/s Rajnish Chibber, Supreme Court highlighted the fine line between trade secret violation and copyright infringement when it comes to disclosing customer’s lists or compiling business data; this provides an example of unfair acquisition of trade secrets by employees. Businesses in India that want to protect their trade secrets must take proactive measures to safeguard their confidential information. This may include:

  1. Implementing internal policies and procedures to protect trade secrets
  2. Entering into non-disclosure agreements
  3. Regularly monitoring and enforcing trade secret protection measures

The High Court of Bombay established specific criteria in the case of Bombay Dyeing And Manufacturing Co Ltd v/s Mehar Karan Singh for the consideration of any information as a trade secret.

Challenges in Protecting Trade Secrets in India

There are various hurdles to securing trade secrets in India, and businesses must be aware of these challenges in order to protect their confidential information. Some of the significant issues in trade secret protection in India are as follows:

  1. Difficulty in Proving Ownership of Trade Secrets in India: – In order to properly preserve a trade secret, ownership must be proven. However, in India, proving that the information in question is a trade secret and that the business is the legal owner might take a lot of work. This is due to the fact that there often needs to be clear evidence of the source of the information or the means by which it was obtained.
  2. Inadequate Legal Protection: – While India has laws aimed at protecting trade secrets, more than legal protection is frequently required. In India, for example, there is no specific law dealing with trade secrets, making businesses assert their rights. The lack of specificity in the law can also make obtaining remedies for trade secrets theft challenging for businesses.
  3. Lack of Awareness for Trade Secret Protection: – Many Indian businesses are unaware of the need to protect their trade secrets and the steps that can be taken to do so. This lack of awareness might expose businesses to trade secret theft and leave them unable to protect their confidential information successfully.
  4. Worldwide Competition: – Indian businesses are increasingly operating in a global market, competing with corporations from all over the world. This Competition might make it even more challenging to secure trade secrets, as competitors can get confidential information more easily. 

Conclusion 

Trade secrets are essential for the success of businesses in India and around the world. Adequate trade secret protection can provide a competitive edge and contribute to overall economic growth. Although the Indian legal structure provides some protection for trade secrets through relevant laws and procedures, they are still issues to be addressed. Business can protect their trade secrets by implementing confidentiality and non-disclosure agreements.

Businesses must be proactive and attentive in protecting their trade secrets, and the Indian Legal System must change to suit the evolving needs of businesses. The government can help by increasing awareness of the need for trade secret protection and providing better legal protections for companies. Overall, the future of trade secret protection in India appears promising, with trade secrets projected to get increased recognition and protection in the coming years.

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