HIMACHAL PRADESH NATIONAL LAW UIVERSITY SHIMLA

SUBJECT-INTELLECTUAL PROPERTY RIGHTS

TOPIC OF
ASSIGNMENT

TRADE SECRET: LEGAL FRAMEWORK IN INDIA

SUBMITTED TO: SUBMITTED BY:

Dr. Chandrika Name- Amit Patel

Assistant Professor of Roll no.-1020181946

Law HPNLU, Shimla (B.A LL.B HONS.)8th SEM.

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TABLE OF CONTENT

1. Introduction

2. Phonetic similar trademark

3. Geographical indications

4. Relationship between Trademark and GI

5. Difference between Trademark and GI

6. Registration of phonetically similar trademark

7. Personal experience

8. Unregistered phonetic similar trademark

9. Homonymous Geographical Indications and its Registration

10. Certain distinction while granting homonymous GI

11. Conclusion

12. References

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 Introduction
Trade secret is a practice or process of a company which is unknown to the outsiders of the
company.
Businesses usually accumulate and use creative as well as innovative ideas that are unknown to
their competitors to gain an edge over and maintain the uniqueness of their product/service.
Information that isn’t generally known to competitors and is protected by confidentiality
agreements, qualifies as quasi-intellectual property known as ‘trade secret’ and is eligible for
protection under tort or contracts law against disclosure or unauthorized use of the trade secret.
The size of a business is no criteria for a business to qualify for having a trade secret and
protection for the same. Enforcing trade secret protection is very necessary for the survival of
organizations and essential for their survival. In this era of globalization, it is of great importance
for businesses to ensure that the protection of their trade secrets from their competitors is adequate
in cases where there is fear of disclosure, especially when hiring new employees for strategic
developments or launching new products and services.
Trade secret law’s policy is protection, maintenance and promotion of ethical standards and fair dealing
which encourages innovation, unauthorized use of which by anyone who isn’t a holder of the trade secret is
considered a violation of trade secrets and unfair practice.

This practice or process is generally known to the very less class group of the company. It gives
competitive advantages over its competitors because of that product or process and the information
is very crucial.
Trade secret product and process is the result of internal resources and development of the
company and is unknown to the outsiders held with very close group of people for example Board
of Directors.
Trade secret means a Formula, Practice, Process, Design, Instruction, Pattern, or Compilation of
information having restricted access. And used by business to obtain advantage over he
competitor.
LEARNING OBJECTIVES
1. You understand the nature of trade secrets, the reasons for protecting them and the practical challenges in
identifying and protecting them.
2. You know how to develop an effective trade secret management program.
3. You understand what is meant by misappropriation of a trade secret and how to prevent such
misappropriation.
4. You know how to take various types of suitable actions to prevent violation of trade secrets.
5. You understand why and how to conduct a trade secret audit.

Defining Trade Secret

Any data or information that relates to businesses and is not known to the general public along with
reasonable attempts being made to keep such informational confidential qualifies as a trade secret.
According to North American Free Trade Agreement (NAFTA) “a trade secret is any information having
commercial value, which is not in the public domain, and for which reasonable steps have been taken to
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maintain its secrecy

In Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber The court held that a trade secret is
information that would cause real or significant harm to the owner if disclosed to a competitor. It can
include formulas not only for the manufacture of products but also, in an appropriate case, the names of the
customers and the goods which they buy.

According to Article 39.2 of the Trade-related Aspects of Intellectual Property Rights (TRIPS)
there are three criteria that have to be taken into consideration;

(a)The information is not, as a body or in the precise configuration and assembly of its
components, generally known among or readily accessible to persons that normally deal with the
kind of information in question;
(b)The information has actual or potential commercial value because it is secret;

(c)The person lawfully in control of the information has taken reasonable steps under the
circumstances to keep it a secret.

Types of Trade Secret.

Formula- a formula for a product, such types of product such as food are required ti display
ingredients in the label in more jurisdiction.

Process- a process such as cooking process that results in an advantage such as a unique
flavour.

Design- the design of a product or service . it can be difficult to keep the design secrets for
long as they can typically be reverse engineered.

Methods- methods such as an algorithm or calculation that improve decisions, operations or

products.

Tools- a tool that improves work results such as a property design tool that improves
productivity and quality.

Automation- Propriety systems and robotics that automate work to improve efficiency and
quality.

Pattern- A reusable solution that applies to multiple designs, systems and or processes.

Know how- the ability to solve a problem that the competitor is not able to solve.

Essential components of Trade Secret:

commercially valuable because it is secret.
be known only to a limited group of persons
be subject to reasonable steps taken by the rightful holder of the information to keep it secret,
including the use of confidentiality agreements for business partners and employees.

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Basic Principles of Trade Secret.
 Non-disclosure agreement- A non-disclosure agreement is a legally binding
contract that establishes a confidential relationship. The party or parties
signing the agreement agree that sensitive information they may obtain
will not be made available to any others. An NDA may also be referred to
as a confidentiality agreement. An NDA acknowledges a confidential
relationship between two or more parties and protects the information
they share from disclosure to outsiders.
The NDA is common before discussions between businesses about
potential joint ventures. Employees are often required to sign NDAs to
protect an employer's confidential business information. An NDA may
also be referred to as a confidentiality agreement.
Eg.- If a brand COCA COLA has a secret formula and it is known to top 10 people of the
company than there should be an Non-disclosure agreement and whom so ever is knowing
the information has to sign the agreement.

 Non-compete agreement- A non-compete agreement is a legal agreement or

clause in a contract specifying that an employee must not enter into
competition with an employer after the employment period is over. These
agreements also prohibit the employee from revealing proprietary
information or secrets to any other parties during or after employment.

A non-compete agreement legally binds a current or former employee

from competing with an employer for some period of time after
employment ceases. Under such an agreement, the employee must not
reveal any trade secrets learned during employment.

These contracts outline how long the employee must refrain from
working with a competitor, the geographic location, and/or the market.
Some states, like California, refuse to enforce non-compete agreements.
Non-compete agreements can prevent workers from getting a job in their
field if they leave a position.

Purpose of Trade Secret

1. When the invention is not patentable.

2. Patent protection is limited to 20 years only but Trade secret can be
kept beyond that period
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 3. There is some cost for the patent protection
4. When it is difficult to reverse engineering.
5. Advertising strategy- curiosity increases to know the details
6. Confidential information may seek for its protection by the common
lay like breach of faith and confidentiality.

Current framework of Trade Secret protection in India

In this era of globalization, where companies off-shore to various countries for expansion as well
as cheaper labor, it is becoming increasingly difficulty to protect business strategies and secrets.
Businesses view technology as secrets rather than patentable information. This is mainly because
competition in markets has reached a level where competitors innovate once information is
available. Though this gives rise to healthy competition, it becomes increasingly difficult for new
businesses to keep up or flourish once such information is available to business majors. Countries
today recognize the need for such secrecy and thus are trying to incorporate protection for the
same in their legal frameworks. In the international community, development of trade secret
protection can be traced to Trade-related Aspects of Intellectual Property (TRIPS), the General
Agreement on Tariffs and Trade (GATT) and North American Free Trade Agreement (NAFTA).

In India, the only protection that trade secrets have received is through traditional judicial rulings
and through provisions and aspects of equitable law, contracts law and torts. The absence of a
legislation for trade secrets has always made rulings difficult but judicial pronouncements have
always tried to develop and protect trade secrets and give remedy to breach of confidentiality.

Judicial rulings for the protection of trade secrets

No specific law protects trade secrets and confidential information in India. However, Indian courts and
tribunals uphold trade secret protection, confidential information and business know-how. Action of
misappropriation under common law can broadly protect trade secrets. Breach of obligation of confidence
as well as third party accessing confidential information in an unauthorized manner can misappropriate
trade secrets. This misappropriation can take place either by misappropriating information shared in
confidence or taken by cheating or theft.

Indian courts and tribunals have made it immensely clear that in the absence of legislation, they will be
protecting trade secrets through common law for the betterment of businesses in India. In John Richard
Brady and Ors v. Chemical Process Equipment P Ltd and Anr[5], the Delhi High Court in a case involving
unauthorized use of trade secrets observed that it would in interest of justice to restrain the defendants from
abusing the know-how, specifications, technical information regarding the plaintiff’s fodder production unit
entrusted to them under express condition of strict confidentiality. In Daljeet Titus, Advocate v. M Alfred A
Adebare and Ors[6] it was held that in agreement with Duchess of Argyll and Ors[7], the court must step
into restrain of a breach of confidence independent of another side. In the end, while granting injunction by
the court, it directed that the defendants would not be entitled to make use of the material of the plaintiff to
which they had access to in breach of confidentiality. The defendants that worked with the plaintiffs cannot
use the agreements, due diligence reports, customer contact lists, and other such material that came into
their knowledge through confidential relationships. With respect to trade secrets of banking businesses, the
Delhi High court in relation to secrecy to banks towards their customers observed that banks owe a duty of
confidentiality to customers which emerges through their monetary relations thus if someone steals such

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information that is guided by secrecy between such a bank and the customer, it shall be liable for hampering
such secrecy.

Under Contracts Law

Indian Courts have upheld trade secret protection under principles of equity and contractual
obligation. Section 27 of the Indian Contract Act makes this evident due to the provision relating
to restrain of trade. This section that is general in its terms, declares all agreements that restrain
trade as void. Initially the section was rigid in its invalidation of restrains, however it was enacted
when trade was still undeveloped and the object of the section was protection of restraint of trade.
Later, the implication of the Law Commission of India in 1958 and its recommendation to allow
reasonable restrain came into picture.

Remedies for infringement of Trade Secrets

The remedy in the case of infringement may be injunction or damages. The law of Specific Reliefs
Act, 1877 may apply in favor of the wronged as under the law of injunction in India. However, a
prima facie case, and balance of convenience along with irreparable loss must be established. In
many cases, the grant of injunction has been refused due to insufficiency of prima facie case. It has
been observed by the courts that in order to obtain injunctions there should be actual concealment
of material fact by the plaintiff to get equitable relief. As per Section 41 (e) of the specific relief
act, injunction cannot be specifically enforced by the court should not be granted.

Trade Secrets in consonance to IPR

IPR laws in India have territorial nature and protection granted to trade secrets may vary from one
region to another. Providing an exhaustive list of what courts in India consider as confidential or a
trade secret isn’t possible. However, through judicial pronouncements, there are a lot of pieces of
information that the court has considered as Trade Secrets traditionally throughout the years.

Employees as threats

People employed in businesses can be a threat to the intellectual property protection of a business.
Though remedies and protective mechanisms can be put into place for protection of intellectual
property, employee loyalty cannot be compromised with and remains the biggest challenge that
businesses have to face to protect their IPs. Coco-cola goes to the extent of letting just two people
in the business know about the ratios of ingredients in their drink to protect the recipe as a trade
secret. Due to the ever changing market and the fact that trade secrets are independently
discoverable by others, businesses are usually advised to keep transforming their trade secrets and
to keep innovating so that competition remains in place and they are able to protect their trade
secrets from getting known.

Safeguards used by budding entrepreneurs to protect their business secrets

Safeguarding trade secrets is very essential for entrepreneurs and small business owners in recent
time. If the products or services derive a lot of novelty due to such trade secrets and thus lead to
the flourishing of the businesses, they will invariably gain focus. This will lead to a lot of
competition especially against major businesses that have already made a mark in the market. Due

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to better research and development operations and abundance of funds on the part of these huge
major businesses, operations and innovation using the trade secret will become easier and these
small businesses and entrepreneurs will be thrown off-board with relative ease.

Thus it is very essential for them to come up with ways to protect trade secrets and promote
innovation while keeping them as secrets. The following are certain steps that they can take to
protect such information and maintain secrecy.

1. Promote Employee Loyalty- Businesses need to understand that employees commit when human
resource policies and overall business strategies are well integrated. Employee loyalty is more
important than customer loyalty to certain extents. Incentives and other advantages are a must to be
given to employees because satisfaction plays a major role in the way employees function.
2. Monitoring Employee Activities- It is important to make sure that employers do not lose
the importance of protecting trade secrets will giving impetus to employee loyalty.
Employers should monitor the activities of employees in the work place, however, privacy
of employees should be respected and employees must not be given an impression of
distrust.

3. Drafting a comprehensive trade secret policy for workplace- A comprehensive trade

secret policy should be drafted for employees and the staff making them aware of the
sensitivity of the issue as well as the nature of such confidential information along with the
potential consequences of breaching such trust.
4. Drafting employment/confidentiality agreements that are enforceable in India- Confidential
information like trade secrets can be fairly protected by enforcing contracts and agreements that are
enforceable in India. Such contract provisions should be prohibiting wrongful disclosure and
misappropriation of confidential information. These agreements should focus on the type of
information that is likely to be disclosed, the manner in which it should be used and the restrictions
on disclosure post-termination.
5. Due diligence and maintaining non-disclosure agreements Due diligence is of extreme
importance to check the employee’s track record of keeping secrets and maintaining confidentiality.
Due diligence including scrutinizing documents as well as agreements with the special emphasis
with respect to non-disclosure obligations as thoroughly as possible without leaving out a
possibility of error.

Conducting Trade secret audits-

Identifying trade secrets that are of significance.

Verifying the company’s title to such trade secrets

.Verifying to make sure that confidentiality procedures are up to the mark and followed

Conclusion

Though the law of trade secrets fits into the existing framework of law of torts, law of contracts
and competition law, there are certain problems with respect to its inception in the field of
intellectual property rights. However, a separate legislation for trade secrets would eliminate that
disparity as well. India, being a developing nation must have a robust law for protecting trade
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secrets. The TRIPS Agreement mandated that its Member States mustchange their laws andbring
in new legislations to fulfill the obligations as under the TRIPS Agreement. It is time now for a
statutory law to come into force in India that not only protects trade secrets and confidentiality but
also makes suitable amendments in the existing framework of Competition Act against
misappropriation and regulation of such confidential information.

The criminal law of the country, the Indian Penal Code, 1860, also needs amendingthat provides
for criminal liability in cases wherein there is breach of confidence or disclosure of trade secrets
similar to what exists in different Countries. The mere presence of a criminal law does not act as
deterrence for individuals who indulge in such practices and thus intensive action and practice is
also needed to keep such incidents at bay. The Companies Act, 1956 should also be amended with
similar provisions that take due diligence with respect to trade secrets into its ambit. Thus, the
Companies can be pro-active and vigilant while protecting their trade secrets. Companies, in this
manner and for this purpose, must build a strong protection system around such information.
Companies must also establish strong psychological loyalty amongst its employees to so that
nondisclosure and/or non-compete agreements are more effective and thus safeguarding its trade
secrets is easier.

Taking the above considerations into effect, it is reasonable to be of the opinion that Trade Secret
protection in India is in its nascent stage and it is essential for it to develop keeping in mind that
India as a developing country needs laws and legislations to be conducive to the business
environment so as to transform the country into a bed of opportunities for companies off-shoring
as well as entrepreneurs that are looking for competition conducive to their businesses without the
fear of misappropriation of their trade secrets and confidential business information, the very basis
that they thrive on.