Context: Currently, India does not have any specific law for protection of trade secrets, thereby leading to their compromise. In this regard, 22nd Law Commission has recommended for enacting a separate and specific legislation on trade secrets ecosystem in India.
What are Trade Secrets?
- Trade secrets encompass confidential business information that derives its value from being kept secret. It includes both technical and commercial information of a business.
- Trade secrets protection does not grant any legal monopoly to the creator of work or invention, rather it protects creators from the unauthorised disclosure or improper use or acquisition of confidential information.
- Unlike copyright, patent or trademark, wherein the proprietary rights are limited to a fixed period of time only, trade secrets can be protected in perpetuity, as long as their secrecy is maintained.
- There is a thin line between the subject matter of different IP rights and sometimes there may be an overlap. For instance,
- Copyright is concerned with expression and not ideas.
- Patent is concerned with the novel inventions and not mere discoveries of scientific principles and abstract theories.
- Trademarks seek to protect identity and/or goodwill of a business and usually do not cover marketing concepts.
- Thus, there is an exclusion of ideas in the general sense from the ambit of traditional forms of IPR.
Safeguards for Trade Secrets
At the Global Level
- The term "trade secrets" has not been mentioned in the TRIPS Agreement. It is protected as ‘undisclosed information’ and ‘data submitted to government or government agencies’ under Article 39 of the TRIPS Agreement under WTO.
- Undisclosed Information or undisclosed test or other data that the beneficiary is obligated to share in order to get regulatory approvals found no mention in earlier international instruments. It was an entirely new addition that came out of the negotiation on the TRIPS Agreement under WTO.
- There is absolutely no obligation whatsoever to enact a specific legislation under the TRIPS Agreement. It is simply left up to states to decide their particular modalities for protecting trade secrets in alignment with their domestic laws.
- Information can be a trade secret subject to three requirements, under the TRIPS:
- Secrecy,
- Commercial value
- Reasonable steps to maintain secrecy, such information will be protected within the ambit of this provision.
- Undisclosed information should be trade related and any information that is entirely private in nature or is unrelated to one's competitive position in not covered within the ambit of this Article.
- Protection of undisclosed information is perpetual provided the information remains confidential and other requisite qualifications continue to be met.
Trade Secrets in India
- India took a principled stand against inclusion of trade secrets or confidential information within the purview of the TRIPS Agreement during the negotiation.
- India did not adopt any specific legislation for Trade Secrets as in the case of other intellectual property rights that fall within the ambit of the TRIPS Agreement and continues to provide protection under common law and contract law, as was the position prior to the adoption of the TRIPS Agreement in 1994.
- Indian Contract Act, 1872 and the Specific Relief Act, 1963 apply to contractual matters. Further, an overwhelming majority of trade-secret disputes are employer-employee disputes and fall within the realm of Section 27 of the Indian Contract Act, 1872. In addition to these, liability can also arise under the provisions of the Indian Penal Code, 1860 such as Section 379 for theft; Section 405 to 409 against criminal breach of trust; Section 417 for cheating; and Section 418 for Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect.
- Bharatiya Nyaya Sanhita, 2023: Corresponding provisions under Section 303 for theft; Section 316 against criminal breach of trust; and Section 318 against cheating can be possibly invoked. Further, where computer resources or electronic records are in issue, the provisions of the Information Technology Act, 2000 viz. Section 43 on penalty and compensation for damage to computer, computer system, etc.; Section 66 against computer related offences; Section 72 providing penalty for breach of confidentiality and privacy; and Section 72A on punishment for disclosure of information in breach of lawful contract can also come into play. Further, third parties can also be liable under the Information Technology Act unless they are exempted by virtue of Section 79.
- Sub-clause (d) of Section 8 of RTI Act, 2005 exempts disclosure of information qualifying as commercial confidence, trade secrets or intellectual property that gives competitive advantage to a third- party and the disclosure of which would harm the same.
Previous attempts at protecting Trade Secrets under a specific law
- National Innovation Bill, 2008 provided for the protection of confidential information. The Bill, however, could not make it past the phase of infancy and was not tabled in the Parliament.
- National intellectual Property Rights Policy, 2016 broader objectives like being to establish strong and effective IPR taws which balance the interests of right owners with larger public interest. One of steps to be taken towards the achievement of this goal was to identify important areas of study and research for future policy development including protection of trade secrets.
- Department Related Parliamentary Standing Committee on Commerce recommended for a separate law on trade secrets.
Need for providing specific statutory protection to Trade Secrets
- Data is very vital to all the industries and one leak of any sensitive information can have a crippling impact on the progress of an entity, especially if it is a start-up.
- A dedicated law on this subject would serve the following benefits:
- Give clarity to companies and enable them to better protect their confidential information.
- Increase industry confidence and enable technology transfer to India.
- Absence of a clear law on trade secret often comes up as an issue during negotiation of free trade agreements. So, it will help in streamlining trade agreement negotiations.
- Encourage disclosure in the sense that the companies will have more faith and assurance while sharing information which will bring in greater cooperation and collaboration.
- Aid the courts in determining the issue better.
- Law for trade secrets and espionage with criminal sanctions being provided for espionage where the State is involved will help in securing sensitive national data, defence data, atomic energy data and other such sectors data.
- Help India avoid international sanctions such as under USTR Special 301 Report.
- Need for transfer of technology and cooperation among industries across borders and a clear and precise law on trade secrets will enable such an ecosystem in India.
Way Forward
- Current economic scenario and state of development of our indigenous industry is substantially different from when the TRIPS Agreement was being negotiated. In today's economic climate, there are fast emerging technologies and sectors such as artificial intelligence (AI) and data-driven technologies that have gained significance.
- A sui generis law on trade secrets evolved by consolidating the existing principles of common law, equity, confidence and contracts as affirmed in judicial precedents while also adding in new elements and contextualising it against the special needs of the Indian industry and economy would be best suited.