Trade secrets: protecting commercial interests

By Abhai Pandey, Lex Orbis IP Practice
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Intellectual property has always been closely tied to technology. New inventions in the field of science and technology are protected through intellectual property rights, which in turn encourages research and development. The ability to discover, create, manage and protect intangible assets is critical in leveraging the maximum benefit from investments in a knowledge-based competitive environment.

Abhai Pandey Lawyer Lex Orbis IP Practice
Abhai Pandey
Lawyer
Lex Orbis IP Practice

While companies must often share their competitive and proprietary information with several individuals to conduct their businesses effectively, it is important that such information is kept confidential. The law of trade secrets has evolved to protect confidential information of strategic importance to businesses. Self-administration by trade secret owners is required; however, protection is offered through the application of common law principles.

The biotech sector is one of the most research-intensive and innovative industries of the knowledge age. Two modes of intellectual property protection are relevant to biotechnology – patents and trade secrets. While patents can be granted in biotechnology if the criteria of patentability are met, trade secrets are a relatively new addition in this field.

Since trade secrets may consist of anything developed by a company, including formulas, patterns, devices or the assemblage of information unknown to competing businesses, they can be put to good use in the biotech industry.

Trade secrets can guard biotechnological techniques and processes, a form of protection which companies have not presently exploited. Further, a trade secret may comprise negative, inconclusive or sufficiently redolent research data that can help a person skilled in the art arrive at some economic advantage. All biotech companies have considerable research to their credit, regardless of the stage of conclusiveness. This data is something companies will want to safeguard as strategic to their present functions or future plans. Research investments will be fruitful if the information generated can be protected as a trade secret.

Implementing trade secret measures would entail putting together an information security policy, internal surveillance and a monitoring programme integrated with legal measures against employees or outsiders who breach or try to breach confidentiality. Liabilities are fixed using the law of contracts, agency, restitution and torts, e.g. non-disclosure and non-competing agreements and liabilities for a breach of trust.

As biotechnology-based activities intensify in India, the time is ripe to strengthen the intellectual property regime in this area. The limitation presented by patent law comes from the requirement for patentable subject matter and the high standards of patentability in accordance with section 3 of the Patents Act, 1970.

In India, biotechnological products do not always satisfy these criteria i.e. novelty and non-obviousness. Nevertheless, they may have enormous economic value not only as products, but also as a source of information, and thus demand some sort of protection against misappropriation by a competitor.

Moreover, a patent claim requires the full disclosure of an invention; here a claimant is restricted from deriving economic benefit by further development of his invention, as he has already put the invention in the public domain.

A trade secret is preferable to patent protection when the biotechnological invention cannot be easily “reverse engineered”. Inventions which do not fulfill the conditions of a written description and an industrial application may also find trade secrets a viable option. Trade secrets may also be a better choice to protect inventions where infringement is either hard to detect or prevent, or where enforcement costs are high.

A trade secret can include a combination of elements that are in the public domain. To that effect, “a unique, effective, successful and valuable integration of public domain elements” may constitute a trade secret. The test is not whether the information has independent economic value in general, but whether it has independent economic value by remaining unknown to individuals who could obtain economic value from its disclosure.

However, a trade secret does not offer the same level of protection as a patent. Instead, it merely prevents a competitor from using information obtained through illicit actions; thus preventing unfair competition.

For what duration of time the information will remain a secret depends on the pace of technology in the subject area. A trade secret cannot be enforced like a patent; it does not give rise to an action where another person derives it through his own ingenuity or later obtains a patent on it. It is most appropriate when the likelihood of independent discovery is small.

Trade secret safeguards may work in a supplemental manner to patents and can add another dimension for a more holistic application of intellectual property protection. The formulation of trade secret laws would spur further technological research and benefit the development of the industry.

Abhai Pandey is a lawyer with Lex Orbis IP Practice, a law firm specializing in intellectual property issues.

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