This article has been authored by Winnie Mathew, a third year student at Symbiosis Law School, Hyderabad.
Significance of Trade Secrets
In the present age, the estimation of the net worth and value of a company relies highly on the company’s intangible assets than its tangible ones. These intangible assets that intellectual property laws seek to safeguard include trademarks, copyrights, patents, goodwill, branding and trade secrets. Among these, trade secrets constitute a major portion of the company’s intangible assets.
Owing to their advantages in information economy, trade secrets have expeditiously become one of the most preferred intellectual properties. The law of trade secrets was built on the common law of unfair competition by the English courts. The underlying philosophy of the law of trade secrets is to preserve and promote principles of commercial ethics and fair dealing. In the age where knowledge and information are the sources of power, trade secrets are often considered to be the fuel required to run companies. This significance has made trade secrets often vulnerable to violation in the form of infringement, stealing and misuse.
Trade secrets differ from other forms of intellectual property in the sense that their protection requires a form of establishment and maintenance. It was held in the case of Ruckhelhaus v. Monsanto that, “the extent of a property right in a trade secret is determined by the extent to which the owner of the secret protects his interest from disclosure to others”.[i] It has been observed that the management and protection of trade secrets is often misunderstood and inadequately performed even in the top performing companies. Trade secrets are comparatively much broader than patents, copyright and trademark with respect to their scope. Trade secrets are utilitarian in nature considering the entire object behind their secrecy is their utility. What sets trade secrets apart from other intellectual property is that both their content as well as expression ought to be kept a secret.
What comprises trade secrets could be anything ranging from recipes, sketches, designs, devices, instruments to know-how, manufacturing methods, commercial methods or any confidential technical information that the company uses and applies in its products and business. Trade secrets do not involve any procedural formality in the sense that they can be protected without the need of registering them. The duration of the protection granted to trade secrets is unlimited, unlike other intellectual properties .
What’s essential for intellectual property to be termed as trade secrets is that- the information should be completely original; it shouldn’t be copied or used in other businesses; it should be a secret i.e., the public mustn’t be aware about it; it should possess some economic or commercial value and mustn’t be something indefinite or insignificant; the owner of this information must take the responsibility and reasonable measures to ensure the confidentiality of it.
Various laws that ensure protecting and safeguarding intellectual property in the form of Trade Secrets
The World Trade Organization has mandated for all member countries to draft their legislations in accordance with the rules incorporated in TRIPS which includes the provisions that can be used for the protection of trade secrets.[ii] The Indian intellectual property rights scenario however includes several legislations such as the Code of Civil Procedure, the Indian Contract Act, Design Act, Patent Act, Copyright Act, Specific Relief Act, and Competition Act.
Indian courts have ensured the development and efficiency of the law of trade secrets in an attempt to preserve and promote fair dealing and commercial ethics. The incidence in the cases of trade secrets infringement paved way for the Indian courts to adopt and apply the Springboard Doctrine.
The essence and application of the Springboard Doctrine.
It was observed in the landmark case of Faccenda Chicken Ltd. v. Fowler that information is graded into three tiers- the first includes information that is already in the public domain and can be used by the employees post service; the second includes confidential information cannot be used or disclosed by the employee during his employment without breaching his duty of fidelity he owes to his employer. However, this information can be used post service in the absence of an express non-disclosure agreement. The third tier comprises trade secrets which cannot be disclosed or used by the employee during or after his employment, even in the absence of an express non-disclosure agreement.
The Springboard Doctrine was developed by the English courts in an attempt to protect trade secrets. This doctrine essentially acts as a protection given to the employees of a company which could be used to help secure their trade secrets. The doctrine is an injunction which is particularly designed to eliminate or restrict benefits the employee may have acquired by the means of any unlawful activity specifically through the misuse of the employer’s confidential information and the breach of his duty of fidelity owed to the employer. A thorough explanation of this doctrine as defined by various courts is that any information acquired in confidence cannot be used as a springboard for any activity or activities which may cause harm or damage of any sort to the owner or provider of that confidential information.
In the case of Inphase Power Technologies v. Abb India Limited, it was held that an ex-employee may be injuncted from using any information in his possession which is likely to cause harm to the interest of the employer, according to the Springboard Doctrine. The court also held that a company which has invested its time, money and manpower in research and development should be assured protection against any infringement and misuse of it.
The case of Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh established certain factors required for information to be classified as trade secrets such as- the precautions taken by the holder of the trade secret to protect its confidentiality; the amount of money and effort disbursed in acquiring and developing that information; the effort and expense it would take for others to obtain and duplicate the information; the financial and/ or otherwise damage to the holder in having that information as against competitors; and the extent to which that information was known both inside and outside the business.[iii] In the case of John Richard Brady & Ors. v. Chemical Process Equipments P. Ltd. & Anr., it was held that trade secrets depend entirely on the principle of equity where the person who acquires the information in confidence cannot take any unfair advantage of it.
The protection of trade secrets is synonymous with the development and promotion of foreign investments, innovation and healthy competition. The Indian judiciary in an attempt to improve and fortify trade secret protection has followed the footsteps of foreign courts and adopted this doctrine in the Indian legal system. The essence of this doctrine is to protect the confidential information or trade secrets of a company from misuse where the information has been used without prior permission or consent from the owner. The infringer will then be held guilty for the infringement of the rights of the employer or owner.
This doctrine empowers the owner to claim infringement, injunction and even punishment which will be awarded to the guilty party. A striking advantage of this doctrine is that the rights of the employer can be protected even before an actual infringement occurs. This doctrine can be made applicable merely when the employer feels threatened that someone may misuse the confidential information.
Trade secret protection is one of the most deserted avenues of law in India considering the lack of adequate framework of proper policies. Trade secret protection is highly dependent on various other statutes for its impact in India. The field of Indian IPR is witnessing the fulfilment of the obligation of improving the standards of IPR law by adjusting multiple legislations, but recurrent disputes are imminent due to the lack of a proper framework. That being said, the Indian courts have done a commendable job in assuring protection of trade secrets and the rights of employers despite the presence of an explicit legislation. The role of the Springboard Doctrine has been and will continue to be indispensable in the Indian legal scenario, in the protection of trade secrets of various companies.
[i] Ruckhelhaus v. Monsanto, 476 US 986 (1984). [ii] Agreement on Trade Related Aspects of Intellectual Property Rights, Article 39. [iii] Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh, 2010 (112) Bom LR 375