Protecting Your Competitive Edge: A Guide to Trade Secrets

Introduction

In the business arena, every organization holds certain confidential information critical to its commercial activities, such as manufacturing procedures, which it aims to keep secret to maintain a competitive edge. This information is often referred to as trade secrets, confidential information, or proprietary information. While some business information may be protected under intellectual property rights like copyrights, patents, or trademarks, there exists a category of information that does not fall under these protections, necessitating legal recognition and protection of trade secrets. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) refers to trade secrets as undisclosed information and, through Article 39, obliges member countries to protect this information against unauthorized disclosure, use, or acquisition.

Meaning of Trade Secret

According to Section 4 of the Uniform Trade Secrets Act (UTSA) in the United States, a "trade secret" encompasses all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, programs, devices, procedures, or codes, whether tangible or intangible, and however stored, compiled, or memorialized physically, electronically, graphically, or in writing.

The New Jersey Law Revision Commission proposes that "Trade Secrets" mean information, including a formula, pattern, compilation, program device, method, technique, or process, that:

• Derives independent economic value, actual or potential, from not being generally known to, and not being easily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
• Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

International System of Trade Secret Protection

A survey conducted in the 1990s highlighted a significant global shift towards enhanced trade secret protection, revealing a growing uniformity in the treatment of trade secrets worldwide. Here is a brief overview of the protection mechanisms in selected countries:

United States of America

The USA protects trade secrets under specific legislation, namely the US Trade Secret Law. Following this, the North American Free Trade Agreement (NAFTA), signed on December 17, 1992, between the United States, Canada, and Mexico, defines trade secrets as information with commercial value not in the public domain, for which reasonable steps have been taken to maintain its secrecy. Member countries must protect trade secrets from unauthorized acquisition, disclosure, or use, with remedies including injunctive relief and damages. In response to NAFTA, Mexico amended its 1991 trade secret law to allow private litigants to obtain injunctive relief.

United Kingdom

The UK offers broad and effective protection for trade secrets, including search and seizure orders to protect secrets and preserve evidence. Remedies for breach of confidence include injunctive relief, damages, and third-party liability. In November 1997, the UK Law Commission published a Consultation Report on 'Misuse of Trade Secrets', proposing that unauthorized use or disclosure of trade secrets should be a criminal offense.

Germany

Germany provides robust protection for trade secrets through its 1909 Unfair Competition Law, which includes criminal penalties. Private litigants can seek injunctive relief and damages, with third-party liability also recognized.

Japan

Japan enacted a national trade secrets law in 1991, covering technical or business information with commercial value that is not public domain and administered as a trade secret. Injured parties can obtain injunctive relief and damages, with third-party liability.

Other Countries

Italy provides strong protection for trade secrets, and China adopted its first trade secrets law in 1993. Korea amended its laws to provide statutory protection for trade secrets, effective in 1992. In India, trade secrets are protected under common law through contracts, with no specific statutory law in place.

Legal Framework of Trade Secret Protection in India

India lacks specific legislation for trade secret protection. Instead, courts protect trade secrets through common law and contractual agreements. Contractual and equitable remedies are available under Section 27 of the Indian Contract Act, 1872, and Section 57 of the Specific Relief Act, 1963. Although Section 27 renders agreements in restraint of trade void, employers can enforce confidentiality conditions on employees during and after employment. Remedies for breach include injunctions and damages.

In 2008, the Government of India proposed the National Innovation Bill to grant statutory protection to trade secrets, but it was not passed. The bill followed the UTSA definition and allowed parties to enter into contracts defining rights and duties concerning trade secrets. Section 8(3) of the proposed bill recognized the legal right to enforce trade secrets even in the absence of a contract, transforming an equitable right into a statutory right. The bill also prescribed civil remedies for misappropriation of confidential information.

Conclusion

In today's competitive landscape, protecting trade secrets is essential. Businesses should implement proactive measures such as non-disclosure agreements, security protocols, and employee training to minimize misappropriation risks. Understanding how to identify, protect, and enforce trade secrets helps companies safeguard their valuable information, ensuring continued success. As technology evolves, the nature of trade secrets will change, requiring businesses to stay informed about emerging legal trends and adapt their strategies accordingly.

"Unlock the Potential of Legal Expertise with LegalMantra.net - Your Trusted Legal Consultancy Partner”

Article Compiled by:-

Prerna Yadav

(LegalMantra.net Team)

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.