PROTECTION OF TRADE SECRETS
A SHORT PRESENTATION ON PROTECTION OF TRADE SECRETS REGARDING INTELLECTUAL PROPERTY RIGHTS
R a j a t A g r a w a l
Trade secret is:
• A secret or not generally known in relevant industry
• Giving the owner an advantage over competitors
• It is subject of reasonable efforts to maintain its secrecy
• Examples:- formulas, patterns, methods, programs, techniques, processes or compilations
Not protected by law
Protected without disclosure of the secret
Does not need to pass the test of novelty
Must be somewhat new, unfamiliar to many people including many in the same trade
Unregistered and not created via a statute
MORE ABOUT TRADE SECRETS
Trade secrets are not disclosed to the world
As long as it remains a secret, it remains valuable for the entity owning it.
Stringent measures to be taken to protect it from competitors through civil and commercial means.
Violation of agreement should carry stiff financial penalties, which should be agreed to in writing by the
Entity may not offer to register trade secret as a patent in order to protect its ingenuity (Coca Cola
WAYS OF KNOWING TRADE SECRETS OF COMPETITORS
WAYS OF KNOWING
Reverse Engineering Industrial Espionage
Process of extracting information or knowledge or design from man made and reproducing it.
Dissembling of components, analysing it and working in detail.
Intentions may be socially beneficial or criminal, depending upon situation.
No IPRs are breached as information is reverse engineered to find what it does and how it does it.
Doesn’t create a copy or duplicate; it’s only design to deduce features from products with little or no
knowledge about procedures involved in original production.
It is a form of espionage i.e. an illegal practice by a commercial concern with acts of spying to gain a
Intention is to acquire a trade secret such a proprietary product specification or formula or information
about business plans.
Either IPR is acquired or proprietary information is captured.
A successful industrial espionage makes a level competitive playing field.
Either a dissatisfied employee reveals secret information to competitors to damage existing entity or
favouring interest or competitors acquire it to advance its own financial interest.
Reasons for industrial espionage:
1) Get in and out of information field without being noticed.
2) Competitive environment.
3) Stealing personal information for ransom from target company.
4) Stealing personal information NOT for own use but for selling to another rival company.
5) Giving out of information by a disgruntled employee for a price or coercion.
6) Future plans and prospects.
7) Hacking into information field to disrupt and/ or damage existing information present.
HOW INDUSTRIAL ESPIONAGE IS DONE?
o Revealing information by a dissatisfied employee having mala-fide intentions to its competitors to
damage company structure and financials voluntarily.
o Insiders may provide secret information in exchange of bribe or employment at higher positions at
o Outgoing employee may provide information to new company.
o Intrusion of a ‘spy’ – engineer, cleaner, insurance salesman or inspector who has legitimate access to
o Search may be made through waste paper refuse, (dumpster diving).
o Data may be transferred via internet (paperless unauthorized disclosure of information).
UK Supreme Court confirmed that there can be no liability for misuse of trade secrets unless and until
confidential information is acquired. Test for cause of action for breach of confidence is given in case of
Coco vs. A.N. Clark (Engineers) Ltd.
Elements laid down if in case a breach of confidence is to succeed:
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 & TRADE SECRETS - CHECKLIST
I. Technical information/ research and development
II. Proprietary technology information
III. Proprietary information concerning research and development
VIII. Laboratory notebooks
IX. Experiments and experimental data
INTERNATIONAL TRADE & TRADE SECRETS – CHECKLIST (CONTD..)
X. Analytical data
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.
FACTORS TO BE TAKEN TO DETERMINE APPROPRIATE LEVEL OF
SECURITY TO PROTECT TRADE SECRETS
Extent to which the information is known outside the company
Extent to which the information is known by employees and others involved in the company
Extent of measures taken by the company to guard the secrecy of the information
Value of the information to the company and competitors
Expenditure by the company (time, money and effort) in developing the information
Ease or difficulty with which the information could be properly acquired or duplicated by others.
HOW TO PROTECT TRADE SECRETS
Keeping a check and watching information being provided to outside party.
Use of a warning label.
Restrict of physical and electronic access to information data base.
Continue the use of NDAs (Non Disclosure Agreements)
Create a decoy memory dump or an information pool.
IS STEALING TRADE SECRETS A CRIME?
No specific law covering trade secrecy crime in India.
Enforced using common law or contractually.
Common law action of breach of confidence [Coco vs. A.N. Clark (Engineers) Ltd].
Injunction preventing offender from disclosing trade secrets, return of information or payment of
damages or losses suffered.
PRESENT SCENARIO REGARDING PROTECTION OF TRADE SECRETS
The current scenario on protection of trade secrets in India is not enough because:
Onus to prove breach of confidentiality lies on aggrieved party than the perpetrator.
Remedies are easier to obtain under civil law since under criminal law establishes the aggrieved party to
establish that trade secrets is property of which the theft is committed.
Since burden to prove is on aggrieved party, ultimate beneficiary of theft is the offender is rarely
prosecuted since its difficult to cite evidence regarding the theft.
No fixed law to deal with theft of trade secrets in reality.
Cumbersome criminal procedure in awarding justice in India.
ENTER, THE TRIPS AGREEMENT
INTRODUCTION & POSSIBLE REMEDY FOR TRADE SECRET THEFT IN INDIA
TRIPS Agreement (Agreement on Trade Related Aspects of Intellectual Property Rights) is an international
agreement administered by World Trade Organisation (WTO).
Role of WTO with respect to TRIPS Agreement:
1) Setting down minimum standards for intellectual property.
2) Providing enforcement procedures
3) Provision of remedies
4) Dispute resolution procedures
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.
The information must have commercial value.
Reasonable steps must be taken by owners to protect the secrecy.
MORE ON ARTICLE 39 OF TRIPS AGREEMENT
Fulfilling trade secret requirements under Article 39.2 of the WTO Agreement on TRIPS
In India, now under National Innovation Act of 2008, parties may enforce any rights relating to breach of
confidence covering equitable and tortious claims.
Narendra Modi seeks to further his ‘Make in India’ concept by creating a stringent law on protection of
trade secrets to attract foreign companies to conduct research and development and knowledge
intensive activities in India.
HOW COCA COLA COMPANY PROTECTS ITS TRADE SECRETS?
How the world famous beverage company manages to keep its famous taste of cola, a secret since a long time..
SOME IMPORTANT POINTS
Coca Cola’s recipe is one of the best kept secrets in the world.
It was developed by a pharmacist and kept secret for more than 100 years.
The secret recipe circulating the internet is a myth and even if it isn’t, the ingredients are made known
and NOT the procedure.
The recipe is kept in a vault. Debatable since many argue it is a marketing gimmick, some do not.
Bags containing contents are marked with alphabets numbered ‘X’ or ‘Y’ to prevent spilling knowledge
of contents of bags with instructions on how and when to mix them.
Distribution facilities are given raw mixture in powdered/ syrup form and mixed with carbonated water.
If actual syrup making plants are abroad, then instructions are issued like “Mix Bag X with Bag&3 at 30
degrees in 5 mins after Bag Y as been introduced”
SOME IMPORTANT POINTS
Many companies have tried fractionally distilling coca cola and even went to know the ingredients, but
NOT the formula and procedure.
Even if someone manages to replicate formula of coke, and manages to bottle it, it is immensely difficult
to do it consistency because it is still NOT COCA COLA. Beware of brand power!
The recipe is supposedly locked away at SunTrust Bank in Atlanta, Georgia, USA who own shares of coke
and have two executives of coke sitting in their Board.
Coca-Cola has still not converted or registered its trade secret as a patent – for reasons obvious.
The assembly line of coca cola is highly automated and not manual. Chances of leakage of ingredients,
process is thus lowered.
IF I FIND OUT THE SECRET FORMULA OF COCA-COLA, CAN I
COPYRIGHT IT AND SUE THE COMPANY?
Recipes are list of ingredients. You cannot copyright a list of ingredients.
Even if you could copyright a list of ingredients, it would not matter because there is no limit in
producing the final product because it is injunction on distribution of ingredients only.
Coca-Cola can of course, demonstrate that their production pre-dates your copyright.
Recipes use existing process which are not patentable.
If you are an employee of Coca-Cola, they can sue you if you disseminate the recipe publicly because
there are plans and policies of company limiting release of recipe.
It does not attract the case if someone independently discovers the formula.
P.S. Recipes ≠ Formula
If a trade secret is well protected, there is no term of protection. It can extend indefinitely and till it extends,
it continues providing user with benefits over competitors.
BY RAJAT AGRAWAL