Posted On: November 28, 2022

PROTECTION OF TRADE SECRETS

PROTECTION OF TRADE SECRETS

Trade Secrets are a form of intellectual property rights on confidential information which may be sold or licensed further for a consideration. It is basically information which, if disclosed to a competitor, could cause real or significant harm to the owner of the secret. It could be any confidential piece of information that is used in a trade or business. It can be in the form of a formulae, technical know-how or a peculiar mode or method of business, recipes, processes, software codes, customer lists, supply channels, financial information. Examples of trade secrets include Nestle Maggi Masala, KFC’s chicken, Listerine MouthWash, Hershey’s Milk Chocolate, Google Algorithm, Coca-Cola,etc. Al Knowledgentia Consultants, which is best corporate international law firm in India, we advise all our clients regarding best practices to be followed to protect their commercial interests. We offer professional contract drafting services through which sensitive and confidential information of all our clients can be easily and efficiently protected at all times. Being top legal firm in India, our expert team of lawyers handles all cases of breach of contract professionally.

ESSENTIALS OF TRADE SECRET
In general, to qualify as a trade secret, the information must be:

  • Commercially valuable,
  • known only to a limited group of persons
  • reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.

The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection. The duty not to disclose confidential information generally stems from a contractual relationship between the owner of the trade secret and the person to whom the trade secret is communicated. It may be an employment contract, or a licensing agreement, a commissioning agreement, a contract for works, a joint-venture, a partnership, etc.

LAW REGARDING TRADE SECRETS IN INDIA
In India, there is no specific statute that governs protection of trade secrets. However, there are various other legislations and means through which one can accord protection to one’s trade secrets and also take action in case there is misuse of the information.

  1. LAW OF CONTRACTS

Section 27 of the Contract Act is the specific law that binds the parties not to disclose information contrary to the terms of the contract between the parties. Through signing Non- disclosure and confidentiality agreements and various contract, parties can safeguard their interests and information during usual course of business activity. In case of any breach of contract and its terms , the parties can take each other to courts for settling the matter and take recourse to damages and compensation.

  1. INFORMATION TECHNOLOGY ACT, 2000

Under this law, a penalty is imposed for breach of confidentiality and privacy.

  1. INDIAN PENAL CODE

Few Section such as from Section 405-409 deal with the cases when there is a Criminal Breach of trust.

  1. COPYRIGHT ACT
  2. CIVIL PROCEDURE CODE
  3. CRIMINAL PROCEDURE CODE
  4. THE COMPETITION ACT
  5. THE DESIGNS ACT, 2000

JUDICIAL PRECEDENTS
In India, Judicial opinions and precedents are the sources for the protection of Trade secrets and Confidential Information as there is no specific legislation for it. Following are the cases related which reflect the application of the judicial mind:

  1. TAPAS KANTI MANDAL VS COSMO FILMS LTD, [2019 (1) MhLJ 386],

In this case, the court held that employee can be restrained from doing similar business or seeking similar employment. It has also been held that an employer can include a non-solicitation clause in its contracts of employment. Such a clause would enable it to seek remedies in the form of damages and injunctions against an outgoing employee who solicits business, clients, vendors or employees of the employer. Subject to commercial needs, these conditions are typically imposed for a period ranging between one and two years following termination.

  1. INDEPENDENT NEWS SERVICE PVT. VS MR. ANURAAG MUSKAAN , APRIL 2, 2013

In this case, it was clarified that a negative covenant that the employee would not be employed by any other competitor of the petitioner for whom he would perform similar duties is not a restraint of trade. The court while quoting para 58 of the judgment reported in the case of Superintendence Company of India Vs. Sh. Krishan Murgai, 1981 (2) SCC 246 said that –  The drafting of a negative covenant in a contract of employment is often a matter of great difficulty. In the employment cases so far discussed, the issue has been as to the validity of the covenant operating after the end of the period of service. Restrictions on competition during that period are normally valid, and indeed may be implied by law by virtue of the servant’s duty of fidelity. In such cases the restriction is generally reasonable, having regard to the interest of the employer, and does not cause any undue hardship to the employee, who will receive a wage or salary for the period in question. But if the covenant is to operate after the termination of services, or is too widely worded, the Court may refuse to enforce it.

  1. PRAMOD S\O LAXMIKANT SISAMKAR AND UDAY NARAYANRAO KIRPEKAR VS GARWARE PLASTICS AND POLYESTER LTD , 1986(3) BomCR809

In this case, the respondent contended that the action of the petitioner amounts to criminal breach of trust and cheating as the technical know-how acquired by the respondents amounts to ‘property’ u/s 405 ipc, filed a criminal complaint. The plaintiffs failed to prove the dishonest intention on the part of the appellants. The court had made an observation that if the petitioners use the technical knows how in contravention of the agreement of service, then section 408 and 420 can be attracted.

TIPS ARE FOR BUSINESSES THAT WISH TO PROTECT THEIR TRADE SECRETS:

  1. Timely execution of agreements and clauses such as Non disclosure agreement, non competition clause, arbitration, civil & criminal liability clauses .
  2. Identify what needs protection
  3. Label documents that contain protected information
  4. Monitor where information is stored
  5. Secure computers
  6. Maintain secrecy with outside vendors
  7. Limit public access to the company
  8. Set up employee training and policies

CONCLUSION
At present, its usually the judiciary that is playing a role in clarifying the trade secrets law based on the principle of equity and common law actions against breach of confidence, Indian jurisprudence regarding trade secrets is unclear on a number of important aspects, including:

  •  the scope of damages in the case of a breach of confidential information;
  •  theft of trade secrets by business competitors; and
  • 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.  At Knowledgentia, which is the best litigation firm, we offer advice tailored to our client’s specific requirements and circumstances thereby ensuring foremost protection of our client’s interests at all time. Providing best copyright registration services in India and having a team of top most patent consultants in India, we are you one-stop solution for all kinds of  legal, compliance and supplemental matters. In case of any query regarding this matter you may email us at info@knowledgentia.com or visit our website –https://knowledgentia.com/.

Inderpreet singh
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