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09 trade secrets






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    09 trade secrets 09 trade secrets Document Transcript

    • TRADE SECRETST rade Secrets form part of most businesses. A trade secret, when present is generally very important for the growth and survival of the business. It affords competitive advantage to the business. The most common example of a well guarded trade secret is the formula forCoco Cola. By maintaining the formula as a trade secret, Coco Cola has been able to not onlydominate but retain its position in the beverage market for more than hundred years.MeaningA trade secret may be any information such as a formula pattern, compilation, program, device,method, technique, or process and so on.Such information should have certain attributes in order to qualify as a trade secretThese are: A. Independent economic value B. Not generally known C. Not readily ascertainable D. Reasonable efforts to maintain secrecyIndependent economic valueTo qualify as a trade secret, the information should have independent economic value. It meansthat the information should have commercial or economic on its own without being dependanton other things. The information is generally said to have independent economic value if acompetitor has to put in substantial amount of time and money to develop it.For example, a source code to GPS software for a mobile phone has independent economicvalue on its own and will quality this requirement.Not generally knownTo be protected as a trade secret the information should not be generally known. Generallyknown means that such information should not be common knowledge within the particularindustry. © Brain League IP Services Private Limited - 2011 1
    • For example, a recipe to make sweet corn soup may be common knowledge in the hotelindustry and thus may not qualify for trade secret protection.Not readily ascertainableIn order to quality as a trade secret, the information should not be easily ascertainable by anyperson. It means that it should not be easy for any person to decipher the trade secret afterlooking at or combining the material available to the public.For example, a method for manufacturing a product will not qualify as trade secret if someonecan know how to make it by simply examining the product.Reasonable efforts to maintain secrecyIn order to qualify as a trade secret the information must be maintained as a trade secret usingreasonable measures such as use of access cards, passwords, non disclosure agreements etc.Reasonable measures are considered to be measures which give a notice of secrecy and whichare legally binding. Measures should be such that the put the person who comes in contactwith the information a notice that the information is a trade secret and it has to remain asecret. Similarly the measures taken to maintain a trade secret must be legally binding i.e.measures should be valid in the eyes of the law. Some commonly used reasonable measuresare non disclosure or confidentiality agreements, entry exit interviews, use of passwords,access cards, screening of employees, storing sensitive data under lock and key, informationaccess to few employees etc.MisappropriationThe violation of confidentiality relating to a trade secret is known as misappropriation.Misappropriation of trade secrets includes any of the following acts:Acquisition by improper means: Trade secrets are said to be misappropriated if they areacquired by improper means.Means other than the general practice of the particular industry is considered as impropermeans. Some examples of improper means are theft, bribery, misrepresentation, espionageetc.For example, if a company A implants an employee in company B in order to get trade secretsof company B then company A is liable for misappropriation of trade secrets © Brain League IP Services Private Limited - 2011 2
    • Disclosure or use of a trade secret of another without express or implied consent:Disclosure or use of trade secret without oral or written consent of the owner is considered asmisappropriation.For example, if Rohit and Rahul have similar business and Rohit comes across Rahul’s businessmethods which is maintained as a trade secret and uses it without Rahul’s knowledge. Such useis considered as misappropriation of Rahuls trade secret.Derived from or through a person who has utilized improper means to acquire it: If a personwho acquires trade secret in a wrongful manner transfers it to another person, such transferwill be considered as misappropriation.For example, if Raju has legal access to trade secrets in a company and Mantri steals them fromhim when he visits Raju for a meeting, Mantri would be liable for misappropriation.Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use:Where a person who has signed a non disclosure agreement breaches the same and passes thetrade secret to a third party, such an acquisition by a third party would amount tomisappropriation.For example, Chandan an employee with a company has access to trade secrets of the companyand has signed a non disclosure agreement for the same. If, he sells the trade secret to Suryan,both Suryan and Chandan would be liable for misappropriation.Derived from or through a person who owed a duty to maintain secrecy: When an employeeis under an obligation to maintain the proprietary information as a trade secret, if he breachesit, and passes the information to a third party, it amounts to misappropriation.For example, Vijay an employee with a software company sells software codes to a rivalcompany. Such sale is considered as misappropriation.Accident or mistake: When a trade secret is obtained accidentally or by mistake, it will beconsidered as misappropriation if the party receiving the information is aware that the same isa trade secret.RemediesThe following remedies may be available to a party aggrieved of trade secret misappropriation: © Brain League IP Services Private Limited - 2011 3
    • InjunctionInjunction means that the court will ask the accused party to refrain from further using themisappropriated trade secret. Injunction may be permanent or for a specific time period.DamagesThe court may order the party which misappropriated a trade secret to pay losses incurred bythe owner of the trade secret as a result of such misappropriation.Account of ProfitsThe party which has misappropriated the trade secret may be ordered to give the profits madeby such party as a result of using the trade secret to the owner of the trade secret.Reasonable royaltiesThe court may ask the party who misappropriated the trade secret to pay reasonable royalty atregular intervals as fixed by the court to the owner of the trade secret.Suggested Further ReadingTrade Secret basicsTrade SecretsValidity of Non compete covenants in IndiaIs secrecy always possible?Integrating Secrecy and Exclusivity to gain competitive advantage –Secrecy obligations of employeesTrade secrets and Bio technologyTrade secret protection in India © Brain League IP Services Private Limited - 2011 4