Author: Shreya Saxena
Alliance University, Bangalore
In India, various types of intellectual properties are governed by Intellectual Property Rights, but ‘trade secrets’ are not governed by any specific legislation. But other legislation provides for the same. The Indian courts, however, have not shielded away from protecting such rights in particular circumstances.
The term ‘Trade Secret’ can be defined as a piece of information that has some commercial value which is not in the public domain and reasonable steps have been taken by its owner to maintain secrecy. The conditions mentioned in the definition, are elaborated as:
- Commercial value: Trade secrets are an essential part of business assets as they directly impact its profitability. Such information should be protected and need not have an independently ascertainable economic value, but it should be of commercial advantage to the owner.
- Not in the public domain: A trade secret should not be publicly known, and such information should be protected or should not be accessible to the general public.
- Reasonable steps to maintain secrecy: Reasonable steps should be undertaken by the owner of a trade secret to maintain its secrecy. The concept of reasonability varies on the facts of each case, and the courts have refrained from prescribing particular criteria in this respect. A guiding parameter in this regard has been used by the courts that are to the extent to which a trade secret can generate an economic and commercial gain regarding the efforts expended towards its protection.
This criterion for any information to be classified as a trade secret has evolved from time to time. In 2010, the Hon'ble High Court of Bombay, in the matter of Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh, laid down the below mentioned six factors for any information to be classified as a Trade Secret in India:
(1) To what extent such information is known outside the business.
(2) To what extent such information is known to those inside the business, i.e., by employees;
(3) The precautions that have been taken by the holder of the trade secret to guard such information;
(4) The savings affected and the value to the holder in having the information as against competitors;
(5) The amount of expenditure and effort expended in obtaining and developing the information; and
(6) The amount of time it would take others to acquire and duplicate the information.
When any specific legislation does not define and govern any term or concept of law then the courts in India are often guided by common law principles and the principles of equity, good faith and fair play. A foreign legal dogma seeping into the Indian system is the springboard doctrine that has been followed by the courts in several cases involving the illegal or unauthorised use of trade secrets. The doctrine of springboard has evolved from the principle of equity, where to restrain a wrongdoer from deriving wrongful advantage from such wrongdoings, a court may grant an injunction to restrain such wrongdoer. The doctrine of springboard states that the courts are bound to restrain such person who has come into the possession of such information and is unlawfully using it as a ‘springboard’ to derive commercial or economic gain at the detriment of the rightful owner.
The possibility of obtaining such an injunction from the courts in India is based on certain basic principles formulated in the Code of Civil Procedure 1908, and those are:
• A prima facie case shall exist in favour of the person seeking an injunction.
• The balance of convenience shall be in favour of granting such an injunction.
In the absence of such an injunction, the owner might suffer irreparable loss and injury. Also, the owner of such a trade secret has all the rights to claim such damages. However, the courts in India do not usually award exemplary damages, and the claiming party is required to adduce proof of actual damage.
The owner of a trade secret may file a criminal complaint for theft under Section 378 of the Indian Penal Code, 1860. However, to satisfy various requirements of this section, the trade secret shall be in a physical form (e.g., client lists or blueprints) and must be proven to have been stolen. A complaint may also be initiated for the criminal breach of trust under section 408 of the Indian Penal Code, 1860, read with Section 420 of the Indian Penal Code, 1860, alleging cheating.
The protection for such confidential information is extensive in India, even in the absence of unified legislation formally recognising or defining the concept of Trade Secrets. The below mentioned statutory provisions recognise the various types of confidential information:
(1) The Indian Contract Act, 1872, under Section 27, bars any person from disclosing any information acquired as a result of a contract.
(2) The Information Technology Act, 2000, under Section 72 provides for criminal remedies for a person who may be punished with imprisonment for a term or with a fine or both in case he is found to have secured access to any book, electronic record, information document, register or such other material or discloses or passes such information further without the consent of the person concerned.
(3) The Information Technology Act, 2000, under Section 43A, provides for compensation arising due to the failure to protect sensitive personal data.
(4) The Securities Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, provides for the non-disclosure and use of confidential information by an insider subject to prosecution under the Act.
(5) The Copyright (Amendment) Act, 2012, under Section 65A provides for criminal remedies for the difficulty in technological measures implemented for the protection of works in which copyright subsists and especially in the cases where the act is done to infringe the copyright in such works. Furthermore, Section 65B of the Act provides for a criminal penalty for unauthorised access and alteration of rights management information, usually maintained through online contracts regulating digital rights.
As the law on trade secrets comes forth from the Indian jurisprudence rather than legislation; therefore, a certain fluidity is associated with this concept. Time has elapsed since the Indian courts first recognised this concept. However, few judicial decisions expressing and adopting the concept have come in the domain. Thus, the law on this issue is still at a nascent stage in India. The law of trade secrets is evolving globally, and consolidated efforts towards their protection are essential to foster growth and to provide a more congenial business environment, as well as healthy competition. Thus specific legislation shall be made for the same.