How Can A Trade Secret Be Protected?

Suppose you have developed a novel software algorithm that offers a significant competitive edge to your organization in the technology sector. You've finely tuned it for endless hours. However, what measures can you take to stop rivals from stealing or decoupling it? That is why trade secret protection is so important.

However, how can you guarantee they stay safe? You will learn about the best procedures for trade secret protection from this article. We'll also discuss the challenges involved in the protection of trade secrets. Ready to safeguard the trade secrets of your business? Now hurry up and let's get going!

What is a Trade Secret?

Any information useful to businesses that is kept secret from the public and is the focus of reasonable efforts to maintain confidentiality is considered a trade secret. This could be unique knowledge, proprietary processes, client lists, algorithms, or any other sort of data that gives a corporation a benefit over rivals.

Trade secrets are intellectual property rights connected to private knowledge that can be sold or leased, according to the World Intellectual Property Organization (WIPO).

Essentials of Trade Secrets

Three considerations must be made to protect trade secrets. They are as follows:

• Since it's a secret, it ought to be valuable commercially.
• Except for a small number of people connected to the firm, it shouldn't be publicly recognized.
• The owner has taken appropriate measures to protect the information.

Evolution of the Concept of Trade Secrets in India

In India, the idea of trade secrets has changed dramatically over time. A clear legislation protecting trade secrets did not exist at first. Companies used common law concepts like fiduciary obligation and breach of contract to safeguard their proprietary data.

Indian courts used contract law and equity concepts in the early years to settle disputes involving trade secrets. The necessity for more robust intellectual property protections became evident as India's economy opened up and globalization grew over time.

India joined the World Trade Organization in 1991 after liberalizing trade and approved the Agreement on Trade-Related Aspects of Intellectual Property Rights in 1994. Article 39 of the TRIPS Agreement required all parties to safeguard personal data and trade secrets. Trade secrets and confidential information are not specifically protected by law in India, and this is still the case. Its foundations are common law and justice.

As progress was made, the Indian government introduced the Draft National Innovation Act of 2008 and started to enact legislation specifically protecting trade secrets. The Bill described all the procedures for safeguarding trade secrets; however, it was never approved to become an Act, hence the protective measure was never implemented.

Laws Governing Trade Secrets in India

India does not have a particular legislation protecting trade secrets. However, trade secret protection is overseen by:

The Indian Contract Act of 1872

Section 27 of this Act specifically mandates that parties not disclose information that might violate their non-disclosure agreements. They are widely used by businesses to protect sensitive data. Any breach may lead to legal action for damages or injunctions.

The Information Technology Act, 2000

A further line of defense is the IT Act. The fact that it criminalizes unauthorized access to computer systems or data is helpful when dealing with trade secrets that are kept on digital platforms. Section 72 of this act prescribes a penalty for breach of confidence and privacy.

Copyright Regulation

Business data's trade secrets are likewise shielded by copyright law. A special legal framework was also established by the Personal Data Protection Bill of 2019 for the security and protection of non-personal and personal data in whatever media (digital or non-digital).

Indian Penal Code

Sections 405–409 of the IPC address situations involving criminal breaches of trust.

Cases Related to Trade Secret Protection

Here are some notable cases related to the protection of trade secrets

Case 1: Priya Puri v. American Express Bank Ltd. (2006)

In this case, American Express argued that Priya Puri, a former employee, had broken confidentiality by utilizing the company's customer information after leaving to join a rival. The Delhi High Court ruled that client lists created with a great deal of work and money can be regarded as trade secrets. However, the court decided in favor of Priya Puri since there was no non-compete agreement in existence and customer information wasn't deemed to be strictly secret.

Case 2: Rajnish Chibber v. Burlington Home Shopping Pvt. Ltd. (1995)

In this case, the mail-order company Burlington Home Shopping filed a lawsuit against Rajnish Chibber, a former worker, stating that he stole private data, including client databases. The court determined that Chibber had violated the confidentiality agreement and was found on the side of Burlington. The court highlighted that Burlington's competitive edge is safeguarded by its important trade secrets, which include client lists, pricing methods, and business models.

Case 3: Mehar Karan v. Bombay Dyeing & Manufacturing Co. Ltd. (2010)

The well-known textile company Bombay Dyeing sued former worker Mehar Karan Singh for allegedly providing competitors with trade secrets. The court concluded that Singh had breached his employment contract by divulging information about production procedures and equipment configurations that were considered trade secrets. The ruling reaffirmed the need to safeguard distinctive manufacturing techniques as important trade secrets.

Case 4: Chemical Process Equipments P. Ltd. v. John Richard Brady and Ors. (1987)

A disagreement over private technical drawings and designs for chemical processing equipment was at issue in this case. JA case was launched against Chemical Process Equipments P. Ltd. by John Richard Brady and other plaintiffs, who claimed that their technical concepts were being improperly used. The Delhi High Court decided that the defendant had unfairly benefited from trade secrets. So, he agreed with the petitioners. The court also declared that under equity and contract law principles, trade secrets are entitled to protection even in cases where they are wrongly registered.

How Can We Protect Trade Secrets?

A company's ability to compete requires the preservation of its secrets of trade. Businesses may take the following crucial actions to protect their secrets:

Determine Trade Secrets

Determining precisely what data is a trade secret is the first step. This might include everything from marketing plans to production procedures, customer lists, and algorithms. It's critical to determine what information, if disclosed, may seriously damage your company.

Put Confidentiality Agreements into Action

Agreements of non-disclosure and confidentiality provisions help in the safeguarding of secrets. To guarantee that they are legally obligated to protect the privacy of such information, they should be signed by all parties with access to sensitive data.

Limit Who Has Access to Critical Data

Set restrictions on who in the organization has access to trade secrets. Use a need-to-know basis, where only workers who require the information for their position have access to it. This reduces the possibility of leakage. To enforce these limitations, use access control mechanisms.

Safe Channels for Data and Communication

Make sure all electronic data is kept on safe servers and encrypted. Put in place security measures including multi-factor authentication, intrusion detection systems, and firewalls. When it comes to tangible papers, keep them safe in closed storage that only authorized staff may access.

Employee Confidentiality Training

Inform staff members regularly about the value of trade secrets and the organization's confidentiality standards. Employee awareness training may assist avoid unintentional disclosures and make sure they are aware of the legal repercussions of breaking NDAs.

Track and Verify Access

Use security assessments, audits, and log monitoring to keep tabs on who is accessing sensitive data. This enables you to take preventative measures as soon as you notice any strange behavior or unwanted access.

Procedures for Employees Leaving

Make sure that any secret documents are returned by departing employees, and remind them of their legal responsibilities under the NDA. Turn off their access to any corporate systems that may be used to hold trade secrets.

Challenges Involved in Trade Secret Protection

Trade secret protection is important for Indian enterprises, but it has some difficulties as well. They are:

Lack of a Specific Trade Secrets Act

One of India's biggest problems is the lack of a distinct Trade Secrets Act. Unlike some nations that have separate legislation for trade secrets, India depends on a combination of existing laws like contract law, breach of confidence, and unfair competition principles to address trade secrets protection.

Dependency on Grounds of Unfair Competition, Violation of Contract, and Breach of Confidence

Enforcing non-disclosure agreements and contractual commitments is frequently critical to protection. Businesses must negotiate the complexity of contract law, breach of confidence, and unfair competition laws to pursue remedies in situations of trade secret misappropriation.

The Owner of a Trade Secret has the Burden of Proof

The trade secret owner bears the burden of demonstrating trade secret misuse in court. This can be a difficult process since it needs strong evidence of misconduct, which isn't always simple to come by.

Possibility of Reverse Engineering and Independent Discovery

When other parties can either independently or reverse engineer the secret knowledge, protecting trade secrets becomes more difficult. In these situations, demonstrating that theft took place may be considerably more difficult.

Conclusion

In summary, having robust trade secrets security is critical to a business's ability to compete, flourish, and endure in India. Employers are required to make use of all legal safeguards provided by contract law, employment law, and other laws.

The judiciary’s past pro-employee attitudes give way to tougher trade secret protection. Comprehensive training programs, access controls, cybersecurity precautions, and nondisclosure agreements are mandated for Indian enterprises. They must be on the lookout for any signs of leaking and prepared to respond quickly in court if needed.

Keeping trade secrets under control is essential for company success in the highly driven business environment these days. The true competitive advantage is in knowledge possession and skill application since information is readily available quickly. Organizational awareness is required in addition to legislative measures to guarantee this essential company asset.