Sui generis system needed for trade secret protection

By Manoj K Singh, Singh & Associates, Advocates & Solicitors
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In today’s era of globalization, companies use patent, copyright, design and trademark laws to protect their intellectual property (IP). These laws provide developed and efficient ways to protect IP. Due to the increasing demand for protection through patents, trademarks and copyrights, trade secrets seem like an endangered species.

A revamp of the law is urgently needed to provide protection for trade secrets, which are on the verge of extinction. This article discusses the all-round empowerment of trade secret protection in India and the need for a sui generis system for the protection of trade secrets.

What is a trade secret?

A trade secret is defined as a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable and which can give a business an economic advantage. A trade secret may be any information or any data that has been purposely treated as confidential and is capable of commercial application with a view to economic gain. Well known examples of trade secrets include the formulas or recipes for Coca-Cola, KFC’s chicken, McDonald’s “special sauce”, Krispy Kreme doughnuts, Google AdWords and Gillette razor designs.

Manoj Singh
Manoj Singh

Trade secrets offer the following benefits: (a) no need to file an application; (b) no official prosecution or maintenance fees required to keep them in force; (c) they can protect an invention which is not patentable due to lack of patentability criteria; (d) they are a good option when patenting is costly relative to the value of an invention; (e) less risk of legal disputes; (f) no mandatory public disclosure or registration with a government agency; (g) they have immediate effect and remain confidential for an indefinite period of time as long as confidentiality is not breached.

Scenario in India

Trade secrets in India are protected by the common law. In addition, section 27 of the Indian Contract Act, 1872, provides a contractual remedy for violation of non-disclosure agreements, which restrain employees from disclosing confidential information and trade secrets obtained during the course of their employment.

Confidential information should not be confused with trade secrets as information which is classified as confidential need not be a trade secret. The law of trade secrets is largely derived from the basic principles of tort, contract, property, restitution and agency law.

In the present economic scenario, the enactment of a law to protect an organization’s trade secrets has become crucial for the survival of the organization. Recognizing this need the Personal Data Protection Bill was introduced in parliament in December 2006 but unfortunately the bill has not yet been passed.

Efficient system required

In the era of globalization, multinational companies expect that national law will be able to protect their trade secrets. Being a signatory of the TRIPS (trade-related aspects of intellectual property rights) agreement, India is under an obligation to conform to international standards in respect of IP laws.

The US and other developed countries have legislation to protect trade secrets. An efficient sui generis system for trade secret protection in India is the need of the hour.

The system should provide: a proper definition of trade secrets; legal protection in the absence of non-disclosure agreements as well as in illegal contracts; a standard format for non-disclosure agreements, including third party liability; and civil and criminal remedies for damages and injunctive relief. The trade secrets law should override provisions of other IP laws and the common law.

Conclusions

An effective sui generis system for protection of trade secrets would benefit the Indian economy by: increasing foreign investment and helping Indian companies and businesses to grow; bringing more transparency and removing the concerns of foreign investors regarding the uncertainty of trade secret protection in India; providing better trade secret protection in comparison to the protection provided by the common law.

India offers very strong intellectual property protection in the form of patents, trademarks and copyrights. These forms of IP protection are strong on legal as well as on administrative aspects. Trade secrets are one of the important forms of IP which are lagging behind in some aspects. Although a civil remedy is available to a limited extent under the Indian Contract Act, this does not fulfil all the needs for trade secrets protection in the country.

As discussed above, an effective sui generis system is required to provide a sense of security for trade secret protection among both foreign and domestic investors. Such a system would boost the overall economy of the country and help guarantee IP protection.

Manoj K Singh is the founding partner of Singh & Associates, a full-service international law firm with headquarters in New Delhi.

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