Dr.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY

Intellectual Property Rights II

PROJECT- Protection of Trade Secrets in

India

SUBMITTED TO – SUBMITTED BY –
Dr. Vikas Bhati Vanshita Gupta
Assistant Professor Enrollment No.- 200101153
(IPR II) B.A. LL.B. (Hons.)
Dr. Ram Manohar Lohiya National Law University 8th Semester, Section ‘B’

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 ACKNOWLEDGEMENT
I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them. I am highly indebted to Dr. Vikas Bhati for his guidance and constant
supervision as well as for providing necessary information regarding the project, also for his
support in completing the project.

I extend my gratitude towards the seniors of my course, who constantly helped me find the best
sources for research. Finally, I acknowledge the authorities of Dr. Madhu Limaye Library, who
provided me with the means to make this project in the form of access to online books and
resources.

This project is a result of my efforts combined with all the means and environment that has
been provided to me by Dr. Ram Manohar Lohiya National Law University, Lucknow and its
authorities and I am thankful to them.

Vanshita Gupta,

Enrollment No.- 200101153

8th Semester, Section ‘B’

B.A. LL.B. (Hons.) Dr. Ram Manohar Lohiya National Law University, Lucknow, Uttar Pradesh

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 TABLE OF CONTENTS

PROJECT- ................................................................................................................................. 1

ACKNOWLEDGEMENT ......................................................................................................... 2

TABLE OF CONTENTS ........................................................................................................... 3

INTRODUCTION ..................................................................................................................... 4

PROTECTION UNDER VARIOUS LAWS ............................................................................. 5

Contract Law .......................................................................................................................... 5

Copyright Law ....................................................................................................................... 6

INTERFACE BETWEEN TRADE SECRETS AND COPYRIGHT LAW ............................ 7

Proving Confidentiality Of Information ............................................................................. 7

Breach Of Confidence.......................................................................................................... 8

FUTURE OF TRADE SECRETS IN INDIA ....................................................................... 9

CONCLUSION ........................................................................................................................ 11

BIBLIOGRAPHY .................................................................................................................... 12

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 INTRODUCTION
With recent advances in technology, as well as the ease of sharing, copying and storing
information in the digital world, one of the biggest challenges that businesses face is
the protection of their confidential business information. This information can include
business strategies, proposals, client databases and information, compilations, designs,
programmes, drawings, devices, formulae or compositions. Not all types of information
qualify for

protection under the patent and copyright laws; further, certain data arises out of a
company’s day-to-day operations for which formal protection is not sought, but which
remains valuable.

Many businesses are finding it challenging to safeguard their crucial information, due
to the various online and physical tools available to ease the transfer of data. The threat
they face is not only external, but can also come from internal sources such as employees
and contractors who have access to important business information.

It is increasingly common for employees to switch jobs. When they do, they sometimes
take confidential information with them or even set up competing businesses based on
their previous employer’s stolen data, including technical information, business methods
and strategies. Contractors sometimes infringe on drawings, designs, recipes and
compositions that have been shared with them by a client(or produced under a client’s
technical guidance), by offering the same or similar products at a cheaper price and
under a different label.

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 PROTECTION UNDER VARIOUS LAWS
Although India has no specific trade secrets law, Indian courts have upheld trade secrets
protection under various statutes, including contract law, copyright law, the principles of
equity and – at times – the common law action of breach of confidence(which in effect
amounts to a breach of contractual obligation). Section 72 of the Information Technology
Act 2000 also provides certain protection, although this is limited to electronic records.

The remedies available to the owners of trade secrets are:

● an injunction preventing a licensee, employee, vendor or other party from

disclosing a trade secret;

● the return of all confidential and proprietary information; and

● compensation for any losses suffered due to the disclosure of trade secrets.

Contract Law
In India, a person can be contractually bound not to disclose information that is revealed
to him or her in confidence.

However, in Richard Brady v Chemical Process Equipments Pvt. Ltd., the court went
further by invoking a wider equitable jurisdiction and awarding an injunction in the
absence of a contract. The plaintiff had invented a fodder production unit and, for
indigenous production of the same, had sought a supply of thermal panels from the
defendant. The plaintiff shared technical material, detailed know-how, drawings and
specifications concerning the fodder production unit with the defendant. An agreement
was set out between the parties for the supply of specialised thermal panels; however,
the plaintiffs later discovered that the defendants were unable to supply the required
thermal panels and did not place an order. After learning about the defendant's own
fodder production unit, the plaintiff filed a suit for misappropriation of know-how,
drawings, designs and specifications disclosed to the defendant.

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Copyright Law
In some cases, the courts have recognised client information stored in the form of
databases as copyrightable material.

During the course of their operation, businesses regularly collect data which they arrange
systematically or methodically and can be accessed electronically – for example, in
order to analyse business profitability or customer behaviour, or simply to maintain an
inventory of goods. Thus, databases are an important tool for businesses, allowing them
to run smoothly and plan their future development. Databases are protectable under
copyright law. Section 2(o) of the Copyright Act 1957 defines compilations, including
computer databases, as “literary works”.

In Govindan v Gopalakrishna, which concerned a compilation, it was held that although

the amount of originality in a compilation is small, it is still protected by law. Hence,
no party may steal or appropriate the result of another's intelligence, skills or labour,
even in such works.

The present legal position mandates that every effort, industry or expense of skill results
in copyrightable work, but only those works are protectable which:

● are somewhat different in character;

● involve some intellectual effort; and

● involve a minimum degree of creativity.

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 INTERFACE BETWEEN TRADE SECRETS
AND COPYRIGHT LAW
In theory at least, the treatment of databases as trade secrets can be a stronger form
of protection, since it helps to protect the underlying or inherent data rather than the
mere form of expression or layout protected by copyright law.

In Burlington Home Shopping Pvt Ltd v Rajnish Chibber, the Delhi High Court observed
that although trade secrets protection applies to a wide range of business data, customer
lists and other compilations of business data may be copyrightable as works of fact. In
theory, copyright and trade secrets law protect different elements of compiled business
data, with copyright protecting the expression in these compilations and trade secrets
law protecting the underlying data. However, copyright and trade secrets protection for
compilations of business data in fact frequently converge: copyright protection for
business directories often extends to the underlying data and trade secrets protection
may extend to particular expressive arrangements of data.

In the Burlington Home Shopping case, 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”. The court held that although its
sources may be commonly situated, a compilation of addresses developed by devoting
time, money, labour and skill amounts to a literary work in which the author has a
copyright. Finding that the defendant’s database was substantially a copy of the plaintiff’s
database, the court granted the interim injunction.

Proving Confidentiality Of Information

In Ritika Pvt Ltd v Biba Apparels Pvt. Ltd., where a suit was filed for infringement
of the plaintiff’s clothing designs, the court took the view that if an injunction order
were sought with respect to trade secrets, the specific trade secrets would have to be
mentioned, as well as how the plaintiff had ownership of them; only then would the
court consider granting an injunction order. A general order in respect of an unspecified
trade secret could not be passed against the defendant. Further, no relief under the
Copyright Act could be granted, since Section 15(2) of the act provides that once a

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drawing, sketch or design has been used for creation of more than 50 garments, no
copyright can subsist in it.

In 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.”

Thus, a trade secret suit should make amply clear that the subject information is
confidential.

Apart from pleading that the information is confidential, the plaintiff must prove that
reasonable efforts have been made to keep it confidential. If the owner of the information
cannot prove as much, the information risks losing the quality of confidentiality.

Further, if the information and technique are neither unique nor novel, and the database
is merely a documentation or compilation of existing material or techniques which are
freely available or widely practised, there is no question of confidentiality. Thus, the
mere fact that information is documented in the form of a database does not make it
confidential: it must also have the requisite exclusivity. If a court were to accept,
uncritically and without any statutory regime, a plaintiff’s blanket assumption that it
possessed confidential information in something which was plainly part of the public’s
material resources, that court would overstep the mandate of the Constitution –
specifically, the rights to occupation (Article19(1)(g)) and livelihood ( Article 21).

Breach Of Confidence
In Diljeet Titus, Advocate v Alfred A Adebare, it was held that the courts must step
in to restrain a breach of confidence independent of any right under law. The court
held that in the context of a law firm, copyright existed in a list which had been
specially designed by an advocate and contained details of the firm’s clients, along with
the nature of work and contact person for each one. Notably, this obligation need not
be expressed, but need only be implied.

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FUTURE OF TRADE SECRETS IN INDIA
Since India is a signatory to the Paris Convention, it is relevant to mention that Article
1(2) of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs)
states that intellectual property shall include protection of undisclosed information. Further,
Article 39 of TRIPs states concerns ensuring effective protection against unfair
competition as provided in Article 10 of the Paris Convention, with respect to information
which:

● is a secret not generally known or readily accessible;

● has commercial value by virtue of secrecy; and

● has been subjected to reasonable steps for ensuring its secrecy.

Article 39 states that member nations must ensure that natural and legal persons have
the “possibility” of preventing such information, within their control, from being disclosed,
acquired or used by others without their consent, in a manner contrary to honest
commercial practice. It can be inferred that the “possibility” referred to here implies
that trade secrets should be accorded protection within the legal system and not
necessarily in the IP legislative framework of the member nation.

The 1989 General Agreement on Tariffs and Trade discussion paper on India establishes
that trade secrets cannot be considered IP rights, because the fundamental basis of an
IP right rests in its disclosure, publication and registration, while trade secrets are
premised on secrecy and confidentiality. The paper goes on to state that the observance
and enforcement of secrecy and confidentiality should be governed by contractual
obligations and the provisions of appropriate civil law, not by IP law.

On May 12 ,, 2016 , India approved the National IP Rights Policy, which has seven
objectives. One of these objectives is to ensure an effective legal and legislative
framework for the protection of IP rights. The steps to be taken towards achieving this
objective include the identification of important areas of study and research for future
policy development; one such area identified was the protection of trade secrets.

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In a discussion paper on IP rights at the subsequent US-India Trade Policy Forum held
on October 20, 2016 in New Delhi, India’s representatives noted that
India protects trade secrets through a common law approach and
reiterated the country’s commitment to the strong protection of trade secrets. It was
agreed that a toolkit would be prepared for industry, especially small to medium-sized
enterprises, to highlight applicable laws and policies that may enable businesses to
protect their trade secrets in India. A training module for judicial academies on trade
secrets may also be considered. A further study of various legal approaches to the
protection of trade secrets will also be undertaken in India.

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 CONCLUSION
At present, Indian trade secrets law is a judiciary-made law, based on the principle of
equity and common law actions against breach of confidence, with the jurisprudence as
a whole revolving around an employee’s obligations and duties towards the employer
regarding confidential information gained during the course of employment. Indian
jurisprudence regarding trade secrets is unclear on a number of important aspects,
including:

● the scope of damages in the case of a breach of confidential information;

● theft of trade secrets by business competitors; and ● procedural safeguards

during court litigation.

Further, in the absence of a specific trade secrets law, the courts have ruled in favour
of the proprietor of information as literary work as defined under copyright law.

The recent creation of the National IP Rights Policy has raised hopes for the enactment
of a trade secrets law, since this is one of the objectives of the policy. Although no
timeframe has been provided for the achievement of this objective, one can be certain
that there will be a trade secrets law in the near future.

Practical tips to protect Trade Secrets:

● Label the information to be protected as “confidential”, so that employees

are aware that they are dealing with sensitive business information.

● Restrict access to databases, servers and computer programs that store

trade secrets.

● Ensure that access to servers is password protected and that a suitable

notice is displayed on computer screens when accessing sensitive areas.

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 ● Educate employees on why protecting trade secrets is important for
business.

● Sign non-disclosure agreements with any third parties with which

commercial business information is shared.

● Use a combination of technical and legal solutions to protect databases.

BIBLIOGRAPHY
● Narayanan, P., Intellectual Property Law, Eastern Book House.

● Padmanabhan, Ananth, Intellectual Property Rights: Infringement and

Remedies, 1st Ed., LexisNexis, Butterworths, Wadhwa, 2012.

● www.indianbarassociation.org

● www.legalserviceindia.com

● www.tradesecretslaw.com

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