Trade secrets in India

The scope of “trade secrets” is broad enough to include any kind of “confidential information” that (a) is not generally known or accessible to others, (b) has a commercial value and provides its owner a business advantage over his competitors, and (c) has been preserved as such by the owner of the information.

Why trade secrets over patents?

This note discusses trade secret protection for those subjects that are technical in nature and related to innovations and inventive subjects. Many a times, an inventor considers protecting their inventions or technical know-how as trade secrets and not particularly as patents. This could be for a variety of reasons inter-alia the following:

1. the inventors or the technology-holder are a growing business or start-up,
2. patent protection could be generally expensive,
3. the limitedness of patent protection term versus possible perpetual rights over a trade information maintained as trade secret or confidential information,
4. the technology or technical know-how is not of great commercial value and merely supplements the value of certain other valuable and inventive technologies, and/or
5. the technology, though being inventive and of value, does not qualify to be a patentable subject matter under patent law provisions, due to it being a software technology, an AI generated technology, or any other emerging technology.

Preserving secrecy during enforcement of trade secrets rights in India

The principles of the protection of confidential information and trade secrets are governed in India by contractual law, the common law and the principles of equity; and there is no statutory law affording trade secrets protection to their owners. In this situation, it becomes tricky when it comes to dealing with misuse of trade secrets and confidential information.

The Indian law provides for civil and criminal remedies for breach of rights in trade secrets, theft and misappropriation thereof. An aggrieved party could seek injunctions against misuse and breaches, damages including punitive damages, compensation, and loss of profit, etc. by way of initiating civil proceedings before courts having relevant jurisdictions.

Challenges during enforcement

One of the main challenges while enforcing rights over trade secrets is the “preservation of secrecy” by the courts during proceedings concerning trade secrets. Since there is no statutory trade secrets law affording such kind of preservation, the courts have been resorting to international judgments for the creation of “confidentiality clubs”^[1] for specific types of matters including those concerning violation and misuse of trade secrets, since as early as 2012^[2]. The High Court of Delhi has in the recent years made a room for the setting up of confidentiality clubs in its official rules of practice and procedure^[3], without specifying the expression per se or the roles and responsibilities associated with it. Few other high courts of the country have followed the suit owing to requirements in specific matters.

Having said that, it is difficult to still sum up that the setting up of a confidentiality club in a case concerning violation of trade secrets rights, would ensure the preservation of trade secrets during court proceedings absolutely. Since the confidentiality club related provisions are not codified or uniform by way of a fundamental statute, different courts exercise their subjective discretion in laying down rules governing confidentiality club in each case, such as for members’ qualifications in the club, the manner in which the evidence should be collected, recorded, inspected, shared, stored, etc., whether the proceedings shall be held in camera or otherwise, to what extent the information disclosed to the members of a confidentiality club be further disclosed to and dealt by the counter party for the purpose of determination of issues at hand, and the like. All these considerations during court proceedings do not guarantee preserving confidentiality in trade secrets and may result in loss of value therein.

Another aspect is that the chances of leaks of valuable and confidential documents and information from court data rooms and missing court files cannot be ruled out.^[4] These challenges in addition to the fact that the principles surrounding trade secret protection are governed by the contractual law, the common law and the principles of equity leave the parties facing misuse of their trade secrets and confidential information rather demotivated to approach courts for seeking reliefs against such misuse.

Blurring lines between "trade secrets" and "confidential information"

It is also important to highlight that while in reality, “trade secrets” are a subset of larger “confidential information” pool and the need for the former’s preservation would be much higher, in the practical parlance in a few countries, such as India, and through the usage in common law, the distinction between the expressions “trade secrets” and “confidential information” seemed to have blurred when it comes to determining and enforcing rights over “trade secrets” and “confidential information”. The two expressions are most times interchangeably used in the context of “trade secrets” in common law.

Does National IPR Policy of India recommends statutory trade secret law?

The National IPR Policy of 2016^[5], which is a regulatory guideline for the adoption and implementation of model intellectual property regimes for the growing needs of the country, has included a recommendation on updating and legislating, wherever necessary, IP laws, including for the protection of trade secrets. With it has come a duty as well as a challenge for the law makers to provide for sufficient scheme and mechanism for the protection of rights over trade secrets as part of the IP regimes. It is yet to be seen how the statutory law around trade secrets is formed in due course.

Practical tips for protection

As for now, the essential steps for those who wish to protect their new technology and technical know-how as trade secrets, are emanating from the very foundational logic of “prevention is better than cure”.

This means:

• tighten your confidentiality and non-disclosure agreements with employees and business associates;
• have a strong trade secrets policy for the workforce;
• frequently keep auditing the technical know-how that has been developed and also the one that is in developmental phase, for the identification of confidential information that could be in the nature of valuable trade secrets; and
• take measures to preserve them as such.

References