PROTECTION OF TRADE SECRETS– A trade secret is any kind of information that is secret or not generally known in the relevant industry giving the owner an advantage over competitors. Generally, 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. Examples of trade secrets include formulas, patterns, methods, programs, techniques, processes or compilations of information that provide one’s business with a competitive advantage.
The precise language by which a trade secret is defined varies by jurisdiction (as do the precise types of information that are subject to trade secret protection). However, there are three factors that (though subject to differing interpretations) are common to all such definitions: a trade secret is some sort of information that (a) is not generally known to the relevant portion of the public, (b) confers some sort of economic benefit on its holder (which means this benefit must derive specifically from the fact that it is not generally known, not just from the value of the information itself), and (c) is the subject of reasonable efforts to maintain its secrecy.
Trade secrets are not protected by law in the same manner as trademarks or patents. Probably one of the most significant differences is that a trade secret is protected without disclosure of the secret. A trade secret might be a patentable idea but not always. Unlike patent, a trade secret does not have to pass the test of novelty; nevertheless the idea should be somewhat new, unfamiliar to many people including many in the same trade.
Trade secrets are not registered like other forms of intellectual property and are not creatures of statutes. Instead, the judicial system of each country determines the requirements for obtaining trade secrets protection. In India, trade secrets are not covered under any law.
The TRIPS Agreement under Article 39 protects trade secrets in the form of “undisclosed information”, and provides a uniform mechanism for the international protection of trade secrets. Such information must be a secret, I.e. not generally known or readily accessible to person within the circles that normally deal with all kinds of information in question. Also, the information must have commercial value because it is secret and the information must be subject to reasonable steps by its owners to keep it secret.
TRIPS Agreement requires the member countries to provide effective remedies for trade secret misappropriation including:
- Injunctive relief;
- Damages; and
- Provisional relief to prevent infringement and to preserve evidence.
If a trade secret is well protected, there is no term of protection. Trade secret protection can, in principle, extend indefinitely and in this respect offers an advantage over patent protection, which lasts only for a specified period. It is equally possible that a company may decide not to patent as for instance formula for Coca-Cola which is considered to be one of the best well protected trade secrets.
The test for a cause of action for breach of confidence in the common law world is set out in the case of Coco v. A.N. Clark (Engineers) Ltd., (1969) R.P.C. 41:
- The information itself must have the necessary quality of confidence about it;
- That information must have been imparted in circumstances imparting an obligation of confidence;
- There must be an unauthorized use of that information to the detriment of the party communicating it.
INTERNATIONAL TRADE AND TRADE SECRETS
In technology transfer a trade secret may be far more valuable than a patent. Some times a trade secret is not really a secret and may not be of much value either. In a technology package some part is usually unprotected information, even so the best way of obtaining this unprotected information is to buy from the suppliers. Companies must be assured trade secret protection, which they are enjoying in their respective countries under the international licensing agreements. The value of trade secret lies in its secrecy. If a company cannot ensure protection of its trade secrets in a foreign country, it will not do business in that country. Every company should therefore, take some important measures to protect its trade secrets.
A checklist for the identification of potential trade secrets owned by a manufacturing company has been devised which inter alia includes:
(i) technical information/ research and development;
(ii) proprietary technology information;
(iii) proprietary information concerning research and development;
(iv) formulas;
(v) compounds;
(vi) prototypes;
(vii) processes;
(viii) laboratory notebooks;
(ix) experiments and experimental data;
(x) analytical data;
(xi) calculations;
(xii) drawings- all types;
(xiii) diagrams- all types;
(xiv) design data and design manuals;
(xv) R&D reports- all types;
(xvi) R&D know-how and negative know-how (i.e. what does not work);
(xvii) Production/ process information;
(xviii) Proprietary information concerning production/ process etc.
Some experts suggest that it may be prudent for the companies to conduct an intellectual property audit to identify the protectable business information. This will help the companies to assess the value of the information useful for their business. The intellectual property audit is the starting point for the development of a trade secrets protection programme as company’s portfolio of trade secrets is constantly changing. Some information becomes obsolete, new information is created which is extremely valuable and may be protected.
Once the audit is complete, the next step is to determine appropriate level of security necessary to protect different types of trade secret. There are six factors which 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:
- The extent to which the information is known outside the company.
- The extent to which the information is known by employees and others involved in the company.
- The extent of measures taken by the company to guard the secrecy of the information.
- The value of the information to the company and the competitors.
- The expenditures by the company (time, money, effort) in developing the information.
- The ease or difficulty with which the information could be properly acquired pr duplicated by others.
