This article is written by Aakansha Gupta

This paper highlights the importance of Trade Secret protection in Intellectual Property Rights (IPR) and how it is useful for an organization. This article lays down some commonly used methods to protect trade secrets and also it emphasizes a protection plan in regard to trade secret. This article also state the difficulties faced by companes in protecting the trade secret of an invention, product or service. Though, there is no such governing law yet established in India for protecting trade secrets, but there are some approaches through which trade secret can be protected are listed in the article below. This article emphasizes on the Coca - Cola company that how it has been able to hide its trade secret for more than 130 years. In between it also states the distinction between a patent protection and trade secret protection. It is stated that in Indian Contract Act which provides provision for an ex-employee to not work with competitor in order to protect the trade secret of the company. Internationally some countries or can say all members of WTO have somewhat adopted provisions in regard of protection of trade secret of companies Every country differently define trade secret under IPR as there is no universal definition coined yet.

Introduction

The Intellectual Property laws in India had an acquiescent and stagnant existence ever since they were framed. Intellectual Property Rights (IPR) [1]contributes tremendously in the state and national economies. A bunch of organizations across our economy depend on the adequate enforcement of their patents, trademarks, and copyrights, while consumers use IP(Intellectual Property) to ensure that they are purchasing safe and guaranteed products. Generally, strong IP rights help consumers make them educated about the choice of the safety, reliability, and effectiveness of their purchases. It is enforced that IP rights ensure products are authentic, and of high-quality that consumers can recognize and expect. IP rights also foster the confidence and ease of mind that consumers demand and markets rely on.

Normally, a patent authorizes the owner to regulate who can use, make or sell an invention. Trademarks sanctions their owners to promote a mark as a source of origin of a product or service to the consumers. Copyrights basically protects the form of a literary or artistic work and provides the owner with the capacity to determine who can reproduce or distribute the work, performance or display of a work or prepared derivative works.

Nowadays, organizations keep confidential documents and information of any business or practice are called trade secrets.

It very important to protect the Intellectual Property of a product or business like patent, copyright, trademark as it is a right of the organization upon a innovation, product or service. IP rights also facilitate the free flow of information by sharing the protected the original, patented invention. In turn, this process also leads to new innovations and improvements to existing ones.

Definition of Trade Secrets and Governing Laws

IPR

Trademark is considered as a sensitive information relating to any business practice or activity, which is not known to other people and confers the company with an economic advantage over its competitors.

Trade secrets [2]can protect all Intellectual property concepts like patents, copyrights, trademarks etc. A trade secret can be anything valueable to your company that is unique and not known to anyone outside your company.

A patent is a 20-year absolute monopoly on the right to make, use and sell a qualifying invention. This is a legal monopoly as it is considered as a reward for the time and effort invested in creating the invention. .

If an invention can be reverse engineered then patent protection the best way for protecting it from other people. But, if the invention cannot be reverse engineered, then trade secret protection may be the superior type of protection. For example, most famous trade secrets of all: the formula for Coca-Cola. The Coca-Cola formula has been a secret for nearly 130 years and the formula is a trade secret as no one else has been able to figure it out. [3]Efforts to reverse-engineered it have been failed in the past and the Coca-Cola Company goes to great lengths to keep it as a secret. Controversial reports and several speculations suggest that Coca-Cola actually keeps different parts of the formula in different places and so that no one person knows the entire formula. This loss of the formula would likely cost Coca-Cola untold millions of dollars, or more.

IP being an endorser of Trade – Related Aspects of Intellectual Property Rights (TRIP) Agreement [4]India is under an obligation to bring its intellectual property laws in accordance with international standards. Though, India has achieved a large extent by enacting new and amending legislations on intellectual property laws. In India protection of trade secrets is basically based on Common law. [5]Though, section 27 of Indian Contract Act [6]provides limited remedy, it restricts any person from disclosing any information as the non-disclosure clause is a part of the contract. There are numerous reasons for absence of any statue dealing with trade secrets. Since India became independent followed a socialist pattern because of which the Indian legal system has always strived for social benefit and public rights overruled private rights like intellectual property rights which have not been given due importance. Another reason for absence of any trade secret laws is the dependence of Indian economy on agriculture. As with the absence of big private corporate houses in India until, lately there has been a lot of pressure on government to establish or grant statutory protection to trade secrets.

Difficulties Faced in Protecting Trade Secrets

The confidentiality neeed of a trade secrets represents difference from patent law. If an invention can be reverse engineered, trade secret protection will be impractical. For example, a new type of mouse trap would be easy for competitor to duplicate. They can disumlate it study it, analyze it and reproduce it without cooperation. But without patent protection on the mouse trap, though there is no legal barrier of making similar mouse trap.

Approaches to Protect Trade Secrets

The best way to protect secrecy is to implement a trade secret protection plan:

  1. Restricting Trade Secret Access: If there is any physical evidence available of the trade secret such as written on paper or in stored on any digital media. Limiting the access to physical or computer access, through use of confidential computer passcodes, or keeping hard copies of such information in a sealed file cabinet. One should also greatly limit the access to people who knows the trade secret. This includes employees, contractors, and any vendors or licensees. The trade secret should be shared only with those who “need to know.” Many companies mark stamp “Confidential” on the papers.
  2. Protection of Trade Secret by Contractual Obligation: Any party which have access or who knows trade secret should be bound by contractual obligations. Employees and independent contractors should sign employment or independent contractor’s agreements or should agree to confidentiality agreements. A confidential information which consist of inventions and non-compete agreement with employees is always a great idea. Vendors and licensors have separate information should also have signes agreements that includes confidentiality provision that cover trade secrets. And importantly should include terms of confidentiality should be beyond the term of any agreement.
  3. Diligently Policing should be Maintained by Secrecy: It should be a practice of the organization to remind employees, contractors, vendors, or licensees of their duty to maintain the secrecy of trade secrets of the company. In addition it includes a noticeable disclaimer on any document that trade secret that it is confidential.

There are many approaches to protect trade secrets of organization as they contains important information about company’s inventions, products and formulaes. These are the some approaches to protect trade secrets are-:

  1. Trade Secrets Litigation – It protects misappropriation of significant inventions of organizations. In the United States courts have increased this lititgation as perceived threats to confidential information have led to adoption of Economic Espionage Act, 1996[7].
    1. Protected Information Technology Systems – The cyber threats to computer systems are well documented. Organizations must have security measures- encryption, password controls, virus protection in places and the steps to be taken and need to be align with the level of perceived risk to and value the information concerned.
    1. Physical Controls – Most organizations have access controls in place. The level of security applicable visitors and to employees will depend on the risk to the organization.
    1. Documentary Security – All the confidential information is recorded and transferred within an organization and beyong in documentary form. Marking hard or soft copy documents as “confidential” is a preliminary but importat stage which the companies should not ignore. It demonstrates that the company has drawn attention to the need to conceal the information concerned.
    1. Confidential Policies – Enforcing rights against someone who has misappropriated or disclosed trade secrets suggests reasonable efforts have failed. There is always a risk of information being misused or disclosed by any  determined or malicious infringer despite the best efforts of the owner to protect the information. Having an enforcement policy in place and using it successfully are two different things,  since litigation has cost and risk implication.
    1. Contract of Employment – Provisions to protect trade secrets is an essential protective measure. A standard contract will suffice for many employees, but thise responsible for creating confidential subject matter, or with access to confidential information, will need more specific contractual clauses that reflect the potential threat they pose to the business. There are some legal constraints which restricts an ex-employee’s ability to work in the same field of business, gographical area or for specific competitors for a period of time. Such restrictions generally isolate the ex-employer from the unavoidable risk of any misuse of their secrets by an employee that leaves any organization to set-up their own business or to work for a competitor.

International Framework of Trade Secrets

IPR

Some countries or can say all members of World Trade Organization (WTO) [8]are subject to provisions of the Agreement on TRIPS. As the TRIPS Agreement were the first international agremement to protect trade secrets. The approach laid down in the TRIPS Agreement is based on the concept of protection against unfair competition should include protection of undisclosed information. TRIPS Agreement makes association to the prior- existing protection against unfair competition as appeared in the Paris Convention [9]for the Protection of Industrila Property, a convention that is administered by World Intellectual Property Organization[10].

Though trade secrets are confidential are commercial. Although definition of trade secrets thus is broadly similar among countries, addressing their dual nature as confidential but commercial.

Conclusion

Trade secrets confers a valuable substitute to patent law as can eb kept in secret. In addition  trade secret protection only lasts as long as it is kept as a secret, unlike patent protection which limited to maximum of 20 years. Trade secret protection is an important mechanism or can say an essential entity to a company.


[1] Intellectual Property Rights, 2007

[2] Trade Secret first came into the Indian legal framework in 1977

[3] Satija, Neelam ;Trade Secret: Protection & Remedies (2009)

[4] Trade – Related Aspects of Intellectual Property Rights (TRIP) Agreement, 1995

[6] Indian Contract Act, 1872 No. 09, Acts of Parliament, 1872(India)

[7] The Economic Espionage Act (EEA)—1996—Public Law 104–294, 110 Stat. 3488

[8] World Trade Organization (WTO), 1995

[9] Paris Convention, 1884

[10] World Intellectual Property Organization, 1967

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