Trade Secrets BY AKSHIT GUPTA @LEXCLIQ

Many companies who want to protect their manufacturing process and don’t want to get out there in public trade secrets protect their rights. In this the secrets remain undisclosed for specific amount of time after disclosing it to IPR. In that period the companies get the benefit for securing their rights. After the expiry of such period, the information gets disclosed in public and the owners of IPR can’t get any more benefit from such innovation. Trade secret is all about keeping secrets. The company can enjoy the exclusive right of secrets as long as they want, this is a reason that there is a growing demand globally of keeping innovations as a trade secrets. 

Article 39 of TRIPS requires countries to protect their rights and innovations under actual legal persons and authorities. They lay down three essential elements; 

  •  That information is secret  
  • That information has some commercial value 
  • The holder of such information has taken necessary steps to protect such information 

As there are increasing number of trade secrets cases the honorable high court of Bombay in the matter of Bombay Dyeing& Manufacturing co. Ltd v. Mehar Karan Singh, has laid down that   

  • To what degree the information is in public domain  
  • To what degree the information is known by employees of the business 
  • The steps taken by holder to ensure secrecy of information 
  • The monetary or the commercial value and the competitive advantage is interpreted by the holder of such information 
  • Investment is done in proper time and money by the holder to obtain or develop the information 
  • Estimated cost in terms of money and time that an entity would incur in obtaining or developing the same information independently. 

In this case the defendant was the director of plaintiff company and he had disclosed confidential information of company about the software of real estate business to the competitor. The court held that this is the violation of trade secrets because the information disclosed is not in public domain and the information shared also had commercial value to it. 

Till this day there is no trade secrets law developed by country the court have relied upon the common law to protect the trade secrets law in India. Trade secrets protection in India is given under following categories: 

  • Breach of contract  
  • Breach of confidence 
  • Equity  

Breach of Contract  

In India usually employees are bound to not disclose the information as they are under the non-disclosure contract of company. Companies include confidentiality clauses, on disclosure clauses, in contracts. This type of contract is usually challenged under section 27 of Indian contract act. The court also upheld this type of contract which restrict the individual for non-disclosure. 

In Niranjan Shankar Golikari v. Century Spinning, it was held that the restriction in employment contract regarding the non-disclosure of confidential information during the period of employment and even after the employment ends doesn’t amount to restraint of trade and therefore isn’t under the preview of section 27 of Indian contract act. The main motive behind the post-employment contract is that the employees who are no longer in employment can’t unfair advantage of trade secrets. It is permissible under exception of section 27 and was held in Homag India Pvt. Ltd. V. Mr. Ulfath Ali khan. 

 

Breach of Confidence 

Under this type the Indian court have extended the confidentiality clause to the third party who even though isn’t party to contract but still can be held liable if he/she violates the confidentiality clause. For example, A is hired in a company and b tells him the confidence under the contract and as he is now the employee of the company. Later on, c, insist A to tell him that secret in confidence but later on disclose in public now. C can be held liable under breach of confidence as he is a third party even though not in contract with B. 

Equity  

It is method in which the misappropriating party can be held liable under implied contract of confidentiality between parties.  

This concept was first laid down by Delhi high court in John Richard Brady v. Chemical process equipment p. ltd.  where the court implied injunction even though there was no contract. The court said that there need not be express contract the implied contract can still be considered as per the surrounding and circumstances.  

After getting out from all these concepts there are some key cases in which confidentiality claims may arise: 

  • Where an employee or consultant or contracting party gets possession of confidential information in employment or even not in employment and later on do unfair use of such information. 
  • Where the third party gets the information in confidence but later on use in unfair manner 
  • Where employee is in implied contract to not disclose such information.  

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