Protection Of Trade Secrets – Intellectual Property Rights Laws and Practices Important Questions

Question 1.
The TRIPS agreement provides protection to trade secrets. Elucidate.
Answer:
The TRIPS Agreement under Article 39 protects trade secrets in the form of “undisclosed information”. The protection must apply to information that is secret, which has commercial value because it is secret and that has been subject to reasonable steps to keep it secret. The Agreement does not require undisclosed information to be treated as a form of property, but it does require that a person lawfully in control of such information must have the possibility of preventing it from being disclosed to, acquired by, or used by others without his or her consent in a manner contrary to honest commercial practices.

“Manner contrary to honest commercial practices” includes breach of contract, breach of confidence and inducement to breach, as well as the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition. The Agreement also contains provisions on undisclosed test data and other data whose submission is required by governments as a condition of approving the marketing of pharmaceutical or agricultural chemical products which use new chemical entities. In such a situation the Member government concerned must protect the data against unfair commercial use. In addition, Members must protect such data against disclosure, except where necessary to protect the public or unless steps are taken to ensure that the data are protected against unfair commercial use.

Question 2.
What is a trade secret? How are trade secrets protected?
Answer:
A trade secret is any kind of information that is secret and not generally known in the relevant industry giving the owner a benefit over competitors. In other words, any information which can be used in business and is sufficiently valuable to afford an actual or potential economic benefit over others is a trade secret. Trade secret includes formulas, patterns, methods, programs, techniques, processes or compilations of the information providing a competitive edge. Trade secrets are not protected by any law as a registered trademark or a patent. Article 39 of the TRIPS agreement protects trade secrets in the form of ‘undisclosed information’ and provides a uniform mechanism for the international protection of trade secrets.

These are protected by a variety of civil and commercial means. Any other person (including employees) with the potential to come to know the secret is asked to sign a confidentiality and/or non-disclosure agreement. Infringement or infringement of these agreements generally entails financial penalties.
In India, the only remedies available for the protection of trade secrets are civil or equitable remedies for a breach of confidence cause of action. They include:

  • an award of the injunction “preventing the third party from disclosing the trade secrets,” and “confidential and proprietary information,” and;
  • In the case of “for any losses suffered due to disclosure of trade secrets.” The court may order any damages or compensation to be given to the plaintiff. The court may also order the party at fault to “deliver up” such materials.

Question 3.
(b) Article 1 (2) of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) states that intellectual property shall include protection of undisclosed information. Discuss India’s National IP Rights Policy for the future of Trade Secrets in India.
Answer:
Article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights provides that member nations must ensure that natural and legal persons have the “possibility” of preventing such information, within their control, from being disclosed, acquired, or used by others without their consent, in a manner contrary to honest commercial practice. It can be inferred that the “possibility” referred to implies that trade secrets should be accorded protection within the legal system and not necessarily in the IP legislative framework of the member nation.

The 1989 General Agreement on Tariffs and Trade (GATT) discussion paper on India establishes that trade secrets cannot be considered IP rights, because the fundamental basis of an IP right rests in its disclosure, publication, and registration, while trade secrets are premised on secrecy and confidentiality. The paper 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, not by Intellectual Property (IP) laws. On May 12, 2016, India approved the National IP Rights Policy, which has seven objectives.

One of these objectives is to ensure an effective legal and legislative framework for the protection of IP rights. The steps to be taken towards achieving this objective include the identification of important areas of study and research for future policy development; one such area identified was the protection of trade secrets. In a discussion paper on IP rights at the subsequent US-India Trade Policy Forum held on October 20, 2016, in New Delhi, India’s representatives noted that India protects trade secrets through a common-law approach and reiterated the country’s commitment to the strong protection of trade secrets. It was agreed that a toolkit would be prepared for industry, especially small to medium-sized enterprises, to highlight applicable laws and policies that may enable businesses to protect their trade secrets in India.

A training module on trade secrets for judicial academies may also be considered. A further study of various legal approaches to the protection of trade secrets will also be undertaken in India. At present, Indian trade secrets law is a judiciary-made law, based on the principle of equity and common law actions against breach of confidence, with the jurisprudence as a whole revolving around an employee’s obligations and duties towards the employer regarding confidential information gained during the course of employment. Indian jurisprudence regarding- trade secrets is unclear on a number of important aspects, including:

  • the scope of damages in the case of a breach of confidential information;
  • theft of trade secrets by business competitors; and
  • procedural safeguards during court litigation.

Further, in the absence of a specific trade secrets law, the courts have ruled in favor of the proprietor of information as literary work as defined under copyright law. The recent creation of the National IP Rights Policy has raised hopes for the enactment of a trade secrets law, being this is one of the objectives of the policy.

It can be safely deduced that India requires exclusive legislation on Trade Secrets and Confidential Protection. It will not only boost the future of Intellectual Property in India but also do wonders on the economic front. A country like India is supplicating now in its own mind for legislation that will supplant the non-existing legislation on trade secrets. The initiative taken by the rest of the world in relation to the legislation on trade secrets should jolt India out of its slumber in order to be abreast with the world.

Question 4.
What is a trade secret? How are trade secrets protected?
Answer:
The trade secret is any business information withheld from public knowledge in order to gain a competitive edge ever other companies. It has been stated that any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable to afford an actual or potential economic advantage over others.is a trade secret. The trade secret is expected to be treated in such a way that it is not available to others (public on competitors) unless obtained by theft or by improper acquisition. Thus, trade secret depends on three factors :

  1. It is not generally known to the relevant portion of the public;
  2. Confers some sort of economic benefit on its holders; and
  3. It is the subject of reasonable efforts to maintain its secrecy.

Examples of trade secrets are:

  • formula
  • pattern
  • idea
  • process
  • physical device.

The measures to protect trade secrets are:

  1. To make sure that a limited number of people know the secret and that, all those who do, are well aware that it is confidential information.
  2. Signing confidentially agreements with business partners whenever disclosing confidential information.
  3. Including confidentiality agreements within employees’ contracts. Under the law of many countries, however, employees owe confidentiality to their employer even without such agreements. The duty to maintain confidentiality on the employer’s secrets generally remains even after the employee has left the employment.

Question 5.
Enumerate the measures that a company should take to protect trade secrets/confidential business information.
Answer:
Every company should take some important measures to protect its trade secrets. They are as follows :

  1. Technical information / research and development;
  2. proprietary technology information
  3. formulas
  4. compounds
  5. prototypes
  6. processes
  7. laboratory notebooks
  8. experiments and experimental data
  9. analytical data
  10. calculations
  11. drawings – all types
  12. diagrams – all types
  13. design data and design manuals
  14. R & D reports – all types
  15. R & D know-how and negative know-how
  16. Production / process information
  17. Proprietary information concerning production/process etc.

Question 6.
What are the factors that need to be taken into consideration while determining information used by a Company is a trade secret?
Answer:
There are six factors that need to be taken into consideration while determining whether information owned or used by a company is a trade secret in terms of the necessary level of security to ensure adequate protection of those trade secrets These are :

  1. The extent to which the information is known outside the company.
  2. The extent to which the information is known by employees and others involved in the company.
  3. The extent of measures taken by the company to guard the secrecy of the information.
  4. The value of the information to the company and the competitors.
  5. The expenditures by the company in developing the information.
  6. The ease or difficulty with which the information could be properly acquired or duplicated by others

CS Professional Intellectual Property Rights Laws and Practices Notes