Source: https://www.khuranaandkhurana.com/2017/08/26/indias-protection-to-secrets-of-trade/
Timestamp: 2019-04-21 04:48:46+00:00

Document:
The global econoamy is trending towards an era of protectionism as can be seen from policies such as “Make America Great Again” and “Make in India”, thereby increasing the significance on exports and the manufacturing sector. As a corollary effect, the importance of Intellectual Property (IP) protection also increases due to the need to extend such to exports for its proper commercialization. On April 28, 2017, the Office of the United States Trade Representative (USTR) released the 2017 “Special 301” Report which reviews global developments on trade and intellectual property (IP). The USTR placed India on the Priority Watch List and one of the reasons for doing so was an outdated and insufficient trade secrets legal framework. It is pertinent to note that the so called Special 301 Report has vested interests of corporate lobbying from the likes of PhRMA (Pharmaceutical Research and Manufacturers of America), Business Software Alliance (BSA) and Intellectual Property Owners Association (IPOA). This piece will attempt to analyse India’s approach to trade secrets protection and its adequacy in terms of business.
Trade secret is a formula, process, device or other business information that is kept confidential to maintain an advantage over the competitors. It is the information which includes formula, pattern, compilation, programme, device, method, technique, or process, that derives independent economic value from not being generally known or readily ascertainable. Therefore, the ingredients of trade secrets are- (a) it is such information not generally known to the public which in turn confers economic or commercial benefit through the maintenance of confidentiality and exclusivity, and (b) it is subjected to reasonable efforts of secrecy since disclosure would result in undue enrichment of others. For example, Coca-Cola’s formula for its aerated drinks and KFC’s recipe for its delicious fried chicken are considered to be trade secrets which have been preserved for many decades.
Article 1(2) of the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS Agreement”), states that intellectual property shall include protection of undisclosed information. Article 39 of the TRIPS Agreement states that in the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention, with respect to information which is (a) a secret not generally known or readily accessible, (b) has commercial value by virtue of secrecy, and (c) has been subjected to reasonable steps for ensuring its secrecy, Member nations are to ensure that natural and legal persons have the possibility of preventing such information, within their control, from being disclosed to, acquired by, or used by others without their consent, in a manner contrary to honest commercial practice. It is submitted that the possibility referred to hereinbefore implies that trade secrets should be accorded protection within the legal system and not necessarily in the IP legislative framework of the said Member nation.
The 1989 GATT (General Agreement on Tariffs and Trade) discussion paper of India sets out that as per India, trade secrets cannot be considered to be intellectual property rights, because while the fundamental basis of intellectual property right rests in its disclosure, publication and registration, trade secrets are premised upon secrecy and confidentiality. It may be noted that disclosure and publication are necessary before according the protection of exclusivity when viewed from the IPR context since the prosecution stage involves challenges and objections which test the grant of said exclusivity. The paper further goes on to state that the observance and enforcement of secrecy and confidentiality should be governed by contractual obligations and the provisions of appropriate Civil Law but not by intellectual property law.
On May 12, 2016 India approved the National IPR Policy with seven objectives and elaborative steps to be undertaken by the identified ministries/departments. One of these objectives was to ensure an effective legal and legislative framework for the protection of IPRs. The steps outlined to be taken towards attaining this objective include, among other things, identification of important areas of study and research for future policy development, and one such area identified was the protection of trade secrets. Hence it may be noted that India has taken a step towards considering the protection of trade secrets under the ambit of IPR protection.
A further study on various legal approaches to protection of trade secrets will also be undertaken by India.
The Delhi High Court in American Express Bank Ltd. v. Priya Puri, defined trade secret as formulae, technical know-how or a method of business adopted by an employer which is unknown to others and such information has reasonable impact on organizational expansion and economic interests. Indian courts have approached trade secrets protection on the basis of principles of equity, action of breach of confidence and contractual obligations.
In John Richard Brady v. Chemical Process Equipments P. Ltd., it was held that independent of an underlying contract or in the absence of one, he who has received information in confidence is not allowed to take unfair advantage of it. This lays down that undue enrichment at the expense or detriment of another goes against the tenets of equity and fairness which need not be dependent on contractual obligations.
In Zee Telefilms Ltd. v. Sundial Communications Pvt. Ltd., it was laid down that in an action of breach of confidence, the obligation of confidence is not limited to the original recipient but also extends to those persons who received the information with knowledge acquired at the time or subsequently that it was originally given in confidence. In Diljeet Titus v. Alfred Adevare & Ors, it was held that the Court must step in to restrain a breach of confidence independent of any right under law and that such an obligation need not be expressed but be implied and the breach of such confidence is independent of any other right. Therefore, it is submitted that the protection of trade secrets does not always necessarily stem from the owner of such secret having a right per se in respect of the same but from the implied obligation to maintain confidence by virtue of the nature of trade secrets in general.
In Niranjan Shankar Golikari v. Century Spinning, it was held that negative covenants in employment agreements pertaining to non-disclosure of confidential information operative during the period of the contract of employment and even thereafter, are generally not regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act, 1872 as a former employee should not be allowed to take unfair advantage of the employer’s trade secrets which are vital for business. Post service restraint in maintaining confidentiality and also carrying on any other business for a limited period is permissible under the exception to Section 27 of the Contract Act, as was held in Homag India Pvt. Ltd. v. Mr. Ulfath Ali Khan.
 Black’s Law Dictionary, Ed. 8, cited in Bombay Dyeing & Manufacturing Co. Ltd. v. Mehar Karan Singh, 2010 (112) BOM LR 3759.
 All categories of IP that are the subject of Part II, Sections 1 to 7 of the Agreement; Section 7 is titled as “Protection of undisclosed information”.
 Paragraph 3.8.4, National IPR Policy, 2016.
 (2006) HI LLJ 540 (Del).
 2003 (27) PTC 457 (Bomb).
 Agreement in restraint of trade is void.
 M.F.A. No. 1682/2010 C/W M.F.A. No. 1683/2010 (CPC) decided on 10.10.2012, Karnataka High Court.

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