This document provides an overview of trade secrets, including: 1. Trade secrets are a form of intellectual property that provide competitive advantage through confidential information. 2. To qualify for protection, trade secrets must be secret, provide commercial value from being secret, and reasonable steps must be taken to maintain secrecy. 3. Advantages of trade secrets include no registration costs and potentially indefinite protection if secrecy is maintained, while disadvantages include weaker enforcement and risk of discovery through reverse engineering.

1. To Patent or Keep Secret
RICHA YADAV
ASSISTANT PROFESSOR
M.Sc., LL.M.

2. What’s Common ????

3. “Forget patents, trademarks and
copyrights…
Trade secrets could be your company’s
most important and valuable assets.”
140 million trade secrets in existence around the world!!!!

4. Topics To Be Covered
1. What is a Trade Secret?
2. International Framework for Trade Secret Protection
3. History of Trade Secrets
4. Information Protected under Trade Secret
5. Types of Trade Secrets
6. Requirements to Qualify as a Trade Secret
7. Pros and Cons of Trade Secret
8. Protection provided by Trade Secret
9. Rights Conferred by Trade Secret
10. Remedies Available
11. Trade Secret or Patent

5. Classification of IP

6. What Is A Trade Secret?
Trade secrets are intellectual property (IP) rights on confidential information
D-I-Y
IP
TRADE SECRET
• Provides competitive
advantage
• Potential to make money
Kept confidential

7. International Framework
 Paris Convention - Article 10bis
 Member States have to provide effective protection against unfair competition.
 TRIPS Agreement - Article 39
 Conditions to be met to qualify as a Trade Secret
 NAFTA
 OECD

8. History of Trade Secrets
 Trade secret law is the oldest form of IP protection.
 Trade secrecy was practiced extensively in Medieval European guilds.
 Modern trade-secret law, however, evolved in the early 19th century, in England, in
response to the growing accumulation of technology and know-how and the increased
mobility of employees.
 In 1868, a Massachusetts court held, in Peabody v. Norfolk, that a secret manufacturing
process was considered property, and was protectable against misappropriation, and
that a secrecy obligation for an employee outlasted the term of employment.

9. Types of Information
Commercial
Information
Negative
Information
Financial
Information
Technical &
scientific
Information

10. Types of Trade Secrets
 Product formulas/recipes
 Manufacturing/processing methods
and techniques.
 Technology used in a business
 Advertising/marketing/business plans
and strategies and research.
 Concepts and designs
 Vendors/Suppliers and Customer Lists
 Pricing/cost/profit information and
payment terms
 Purchase Prices Of Key Raw Materials
 Customer lists
 Software Design Documents
 Technical Data About Product
Performance
 Technical Drawing Or Sketches

11. The formula of Coca‐Cola Perhaps the "best‐kept trade secrets in the world".
 The procedures for protecting the formula for Coca‐Cola (a.k.a. "Merchandise 7X"), according to an
affidavit given by a senior vice‐president and general counsel for Coca‐Cola in a court case, are as
follows:
 The written version of the secret formula is kept in a security vault at the Trust Company Bank in
Atlanta, and that vault can only be opened by a resolution from the Company's Board of Directors.
It is the Company's policy that only two persons in the Company shall know the formula at any one
time, and that only those persons may oversee the actual preparation of Merchandise 7X. The
Company refuses to allow the identity of those persons to be disclosed or to allow those persons to
fly on the same airplane at the same time. The same precautions are taken regarding the secret
formulae of the company's other cola drinks‐ diet Coke, caffeine‐free diet Coke, TAB, caffeine‐free
TAB and caffeine‐free Coca‐Cola.

12. KFC Recipe – The mysterious 11 herbs and spices
 One of the most famous trade secrets comes from loveable, white-suited Colonel Harland
Sanders, who created a recipe for a tasty chicken coating about 70 years ago that contained 11
herbs and spices. That same recipe is still used today at his popular chain restaurant, KFC (aka
Kentucky Fried Chicken). Initially, as he drove to visit potential franchise owners, Sanders kept the
secret recipe in his head -- and the spices in his car -- although he eventually wrote it all down. His
original, handwritten copy is hidden in a safe in Kentucky, and only a few select employees,
bound by a confidentiality contract, know what the recipe is. For further protection, two separate
companies each blend a portion of the mixture, which is then run through a computer processing
system to standardize its blending.
 Rumor has it the employees-in-the-know can't ever travel together by plane or auto to further
safeguard the secret, and that once, when KFC modernized its security systems, the recipe was
temporarily moved to another secret, secure location via an armored car, which was further
guarded by a high-security motorcade.

13. 3 Essential Requirements
1. The information must be secret
2. It must have commercial value because it’s secret
3. Owner must have taken reasonable steps to keep it secret

14. 1. Secret
 “Not generally known among or easily accessible to persons within the
circles that normally deal with this kind of information”

15. 2. Commercial value
 Must confer some economic benefit on the holder
 This benefit must derive specifically from the fact that it is not generally known

16. 3. Reasonable steps
 Under most TS regimes, you cannot have a TS unless you have taken reasonable precautions to keep
the information confidential

17. Lifespan Of A Trade Secret
 Potentially forever - if the information continues to meet the qualifications
(remember: a piece of information, not generally known or reasonably
ascertainable, that gives a business an economic advantage over its competitors),
and it’s not revealed, it remains a trade secret.
 This indefinite life span means that trade secrets can be very valuable assets for
your company.
 However: rights in a Trade Secret only exist as long as the secret is maintained.
 If you broadcast it to the world, you’re out of luck.

18. Lost Trade Secret
 McDonald’s famous special sauce is an example of a recipe that no longer enjoys trade
secret status. Originally, McDonald’s protected its special sauce recipe so vigorously that
McDonald’s actually ended up losing track of the original recipe. This forced McDonald’s
to change the recipe for the special sauce for a few years. McDonald’s eventually
recovered the recipe from an outside company that had produced the special sauce for
McDonald’s years earlier. However, when McDonald’s posted a tutorial video on
YouTube showing consumers how McDonald’s makes its hamburgers (including how to
make the special sauce), the special sauce lost its trade secret protection. Once a trade
secret is lost, you cannot get it back.

19. The Reason’s For Protecting Trade Secrets
• To maintain and promote standards of commercial ethics and fair dealing.
• To provide an incentive for businesses to innovate by safeguarding the substantial time and
capital invested to develop competitively advantageous innovations.
• If not protected, competitors could use these innovations without having to shoulder the
burden of costs or risks faced in developing the innovations.

20. Advantages Of Trade Secret Protection
1. Trade secrets involve no registration costs;
2. Trade secret protection does not require disclosure or
registration;
3. Trade secret protection is not limited in time;
4. Trade secrets have immediate effect.

21. Disadvantages Of Trade Secret Protection
1.The secret embodied in an innovative product may be discovered through
“reverse engineering” and be legitimately used.
2. Trade secret protection only protects you against improper acquisition, use or
disclosure of the confidential information.
3. A trade secret is difficult to enforce, as the level of protection is considerably
weaker than for patents.
4. Another person may patent someone’s trade secret if he has developed the
same invention by legitimate means.

22. How Trade Secrets are Discovered????
 Through Commercial or Industrial Espionage
 Through Breach of Contract
 Through Breach of Confidence
 Cyber Intrusion

23. How Trade Secrets Get Stolen?????
1. Industrial espionage
 Intense competition in domestic and export markets has also lead to an alarming increase
in theft by outsiders, known as industrial espionage. Such activities are on the rise due to
increasing global competition, shorter product cycles, thinning profit margins, and
declining employee loyalty.
a. External threats
 Corporate spying with professional criminals targeting specific technology, initiating
network attacks (hacks), theft of source code, product designs, marketing plans, customer
lists - approaching employees to reveal company information etc.
b. Internal theft
 Internal theft by disgruntled workers or former employees is also intentional.

24. To Establish Violation, The Owner Must Be Able To Show
 Infringement provides competitive advantage
 Reasonable steps to maintain secret
 Information obtained, used or disclosed in violation of the honest
commercial practices (misuse)

25. Legal Protection Of Trade Secret
1. Contract law
 When there is an agreement to protect the TS
 NDA/CA
 anti-reverse engineering clause
2. Principle of tort / unfair competition
 Misappropriation by competitors who have no contractual relationship
3. Criminal laws
Sec. 378, Sec. 403, Sec. 405
4. Copyright Act
5. IT Act
4. Specific trade secret laws
 US: Uniform Trade Secrets Act; Economic Espionage Act

26. Remedies Available
1. Order to stop the misuse
2. Monetary damages
 actual damages caused as a result of the misuse (lost profits)
 amount by which defendant unjustly benefited from the misappropriation (unjust
enrichment)
3. Seizure order
 can be obtained in civil actions to search the defendant's premises in order to obtain the
evidence to establish the theft of TS at trial
4. Precautionary impoundment
 of the articles that include misused TS, or the products that resulted of misusing

27. Rights Conferred
 The right to be protected against the breach of a duty arising from some special
relationship of confidence
 Because trade secrets are only protectable from wrongful disclosure or
misappropriation, they do not necessarily give the owner the right to exclude others.
 There is generally no protection against honest, lawful discovery of trade secret
information by others through, say, reverse engineering the right to be protected
against the breach of a duty arising from some special relationship of confidence, such
that the disclosure of the trade secret is an unlawful act.

28. Steps To Protect Your Trade Secrets
 Employment Agreements and Trade Secret Policies: with employees which bear clauses of full
confidentiality, non-disclosure, and non-compete, even after termination of employment.
 Non-Disclosure Agreements (NDAs): with employees and other business supporting companies, to
keep their trade secrets confidential and safe.
 Adequate Confidential Documentation: serving as ownership and creditability evidence, in case of
any trade secret disputes.
 Security Systems: designed with authentication technologies and scrupulous security checks to be
accessible only to select professionals and business owners or managers, for safeguarding and
protecting your trade secrets.
 NAFTA and GATT Provisions: NAFTA and GATT have adequate provisions and policies for protecting
your trade secrets against unauthorized acquisition, disclosure, misappropriation, or violation of
the trade secret laws. Remedies suggested for these are - injunctive reliefs, damages, and
provisional relief to prevent such infringement.

29. Factors To Consider In Determining Misappropriation
 The existence of or absence of an agreement restricting disclosure;
 The circumstances under which the information was learned by others;
 The extent to which the information is known to others outside of the owner’s business;
 The extent of the owner’s efforts to maintain the confidentiality of the information;
 The value of the trade secret information to the owner and to his/her competitors;
 The ease or difficulty with which the trade secret information could be lawfully obtained
by others without wrongful disclosure or misappropriation; and
 At a bare minimum, the existence of an element of secrecy or originality to the trade
secret information.

30. TS Or Patent
Trade Secret
 No Registration
 Less Cost
 Immediately Available
 Can Last Longer
 No compliance requirements
 No Public Disclosure
 Wide Subject Matter
 No Exclusive Rights
 More Difficult to Enforce
Patents
 Registration
 Fees
 Takes Time to get patent
 Limited in Time
 Compliance requirements
 Public Disclosure
 Limited Subject Matter
 Exclusive Rights
 Strong Protection

31. Patent And TS Are Often Complementary To Each Other!!!
• Patent applicants generally keep inventions secret until the patent application is published by the
patent office.
• A lot of valuable know-how on how to exploit a patented invention successfully is often kept as a
trade secret.
• Some businesses disclose their trade secret to ensure that no one else is able to patent it (defensive
publication).

32. Trade Secret As Per Indian Court of Law
 Tata Motors Ltd. v. State of Bengal
 Bombay Dyeing & Manufacturing Co. Ltd. V. Mehar Karan Singh
 American Express v. Priya Puri
 John Richard Brady and Ors v. Chemical Process Equipment P Ltd and Anr
(The court went further by invoking a wider equitable jurisdiction and awarding an injunction in the absence of a
contract)
 Daljeet Titus, Advocate v. M Alfred A Adebare and Ors
( it was held that the courts must step in to restrain a breach of confidence independent of any right under law)
 Burlington Home Shopping Pvt Ltd v RajnishChibber
(The court dealt with an application for interim relief in a suit by a mail order service company against its employee
for an injunction restraining “breach of copyright and confidentiality”).

33.  Ritika Pvt Ltd v Biba Apparels Pvt Ltd
 Genetics India Pvt Ltd v Shailendra Shiv
 (The court observed: “Pleadings of the nature and quality of information which is
confidential are crucial and in the absence thereof there is no question of
confidentiality.”)

34. Can I Obtain Certified Proof Of Existence For My Confidential Information?
 WIPO PROOF may be used as a step to preserve the confidentiality of your information.
 With a special digital encryption system, it time stamps your confidential information without
being stored outside your sphere. The encrypted proof, which cannot be modified, can certify the
existence of the work at a certain point in time, thus providing a complementary protective
measure for your trade secrets.

35.  ANY innovative idea should be kept as a secretin the beginning.
 Choice between patent or TS must be made both from legal and business
perspectives.
 If you apply for a patent, only give up what is necessary.
 If you apply for a patent, your TS may still be protected for a while.
 Once patent published  TS lost in ALL COUNTRIES

36. TS: No registration, but 3 requirements for legal protection
No need for absolute secrecy, but ‘reasonable measures’
Developing and maintaining TS program