TRADE SECRETS IN INDIA
HOW ARE THEY PROTECTED?
The concept of property has
undergone a sea change over the
years. In the early days, machinery
and mechanism were considered to
be the most valuable assets of a
company and patents were a
prized possession. In the present
day, while estimating the value of
any company the highest value
is placed on its trade secrets. Today
we try to understand the nature of
trade secrets and the trade secret
protection regime in India.
WHAT ARE TRADE SECRETS?
A trade secret is a kind of information which has high commercial value
(owing to its confidentiality) and can be protected from misuse or
misappropriation under common law or contract law. The Agreement on
Trade Related Aspects of Intellectual Property Rights provides for the
protection of ‘undisclosed information’. Article 39 of the TRIPS Agreement
states that in order to ensure effective protection against unfair
competition, it is imperative to protect undisclosed information. Any
natural or legal person can protect information lawfully within their
control from being disclosed or acquired by others without their consent
in a manner contrary to honest commercial practices.
However such information should be a secret
i.e. it should not be known or accessible to
persons who normally deal with that kind of
information. The information kept as a secret
should have commercial value and there
should have been reasonable efforts to keep
the information a secret.
How is a Trade Secret different from
other forms of Intellectual Property?
Trade secrets have a much wider scope than
patents, trademarks or copyrights. For instance
patents require that the invention be novel,
industrially applicable and non obvious. In
addition, it should be open to public disclosure
and needs to strictly fall within the framework
of patentable subject matter. Lastly, patent
protection is only granted for a duration of 20
years. Likewise trademarks only protect a
printed word or an image representing a
product or service while copyright protects only
the manner of expression and not the content
or idea. Also the protection is limited in nature.
Trade secrets, on the other
hand, do not mandate such
requirements. The primary
purpose of a trade secret
being protected is its utility-
therefore a trade mark should
have some utility. The most
important criteria of a trade
secret is that both the content
and the expression should
remain a secret.
Advantages of a Trade
• No registration costs.
• No time limit for
• Protection is
• It does not require any
disclosure or registration
with the Government.
Disadvantages of a Trade Secret:
• Protection ceases if the
secret is disclosed.
• If the secret is embodied in a
product, it can be discovered
through reverse engineering and
patented by another party.
• It is effective against only
improper acquisition and use.
There is no safeguard against fair
• Protection granted is weaker than
that of patents.
How is a Trade Secret protected in
THERE IS NO LAW IN INDIA THAT
PROTECTS TRADE SECRETS!!
However, this does not mean that trade
secrets are devoid of any form of
protection. In the absence of a statute,
several judicial decisions have
forwarded the cause of protecting
trade secrets. However the absence of
a legislative backing leaves a lot to be
In India, the only means through which a trade secret can be protected is by way
of a contract. Non disclosure agreements and restrictive covenants are the usually
adopted means. However, this method is not fool-proof. First, such contracts are
usually not favored by the courts and are unenforceable by statute in some states.
Second, a criminal action cannot be brought against someone in the event of
disclosure of the secret. The only source of relief is a civil suit wherein damages
can be sought. However, despite the quantum of damages awarded to the Plaintiff
Company or individual, the economic loss caused to the plaintiff by the disclosure
of the trade secret is usually massive and results in irreparable damage.
In such a scenario, India is in desperate need of a legislation that aims at
protecting trade secrets. With India being a host to various companies, both
national and international, a trade secret law is imperative. Absence of such a law
renders the trade secrets of such companies vulnerable and can have a crippling
effect on the business of the company as well as the Indian economy.
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