Are Trade Secrets Safe in the Information Age?

20th November, 2019 - 12:18 pm Categories: News & Updates Trade Secrets 0 Comments

In today’s digital age, information has grown to become a very strong tool – almost equivalent to money or power. Its free flow and distribution have led to knowledge (including the ability to create it) becoming an incredibly vital economic input.[1] With an exponential rise in the development of information and accessibility to it, the necessity to protect such information, which may often contain pieces sensitive to the survival and growth of an enterprise, has become incredibly important. Such information is known as a trade secret.

Broadly speaking, a trade secret is any confidential business information which provides a competitive edge to an enterprise. Such secrets range from information on production or manufacturing to that on industry and commerce. The un authorised use of such information is an unfair trade practice and is a violation of the trade secret.[2]Before the advent of the Information Age, protection of trade secrets was much simpler because the tools of thefts were much different than those today. Earlier, to commit theft of trade secrets, perhaps an employee could misappropriate lists or designs of a product or the company’s finances and disseminate them. Or if none of these methods were feasible, one could walk out of a company’s office with a truckload of confidential information at nightfall without the guards noticing. While these practices come handy as movie plots, they have been replaced by more technologically advanced and efficient methods which eliminate the necessity of physical presence or proximity to commit trade secret theft. For instance, cyber criminals could remotely infiltrate a computer system and obtain protected trade secrets. These secrets could then either be made publicly available over the internet for free or otherwise be sold.Other than cyber-crimes, today’s digital media is intelligent enough to capture digital trails, i.e. details about when and where information was created, last edited and accessed is easily available – both a boon and a bane.

As a consequence, businesses must now be more vigilant and protective of their trade secrets than ever. In furtherance of this, many nations have enacted statutes for the particular purpose of protecting trade secrets. However, India still does not have any legislation aimed at protecting trade secrets. Indian courts, based on principles of equity, have upheld that the protection of trade secrets and their violation is a tort in common law. This has typically been done by the application of contracts law. An example isJohnRichard Brady v Chemical Process Equipments Pvt. Ltd.[3], where the plaintiff had shared technical information and detailed specifications of a production unit of the defendant company, the Delhi High Court invoked a wider jurisdiction and awarded an injunction despite the absence of a contract of confidentiality between the parties to the suit.

While these remedies may work as tentative measures to keep a check on trade secret theft, India must enact a specific legislation for trade secrets. As a member of the World Trade Organisation and a signatory of the General Agreement on Trade and Tariffs, India is bound to comply with all the instruments of and annexes to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs)[4]. Article 1(2) of the Agreement[5] states that intellectual property shall include protection of undisclosed information. Further, Article 39[6] states concerns ensuring effective protection against unfair competition, as provided in Article 10bis of the Paris Convention[7], with respect to information which –

(i) is a secret not generally known or readily accessible;

(ii) has commercial value by virtue of secrecy; and

(iii) has been subjected to reasonable steps for ensuring its secrecy.

Moreover, Article 39 requires members nations to ensure that both natural and juristic persons must be able to prevent, within their control, the disclosure, acquisition and/or use of such information without their consent and in a manner contrary to honest commercial practice.[8] In a US-India Trade Forum in 2016, Indian representatives reiterated India’s commitment to strong protection of trade secrets. In furtherance of this, it was agreed that a toolkit be prepared for small and medium sized enterprises, highlighting the applicable laws and policies in better protection of such information. Additionally, a training module for judicial academies and further study into the various legal approaches to such protection was also recommended.[9] All of this has created hope for a well-established framework on trade secrets sometime in the near future.

While protections and remedies provided by courts and legislations continue to be of aid, businesses must take measures of their own, by way of internal policies and procedures, to ensure protection of their secrets –

(i) Stringent hiring and termination policies;

(ii) Limiting access to trade secret information;

(iii) Training employees on the importance of keeping trade secrets confidential and on how to keep them safe;

(iv) Risk assessment to determine how sensitive the secrets are, where the information is stored, who has access to it, and so on;

(v) Encryption of sensitive information.

The digital world is no friend to trade secrets and it is always best for businesses to assume that others will attempt to discover and appropriate their trade secrets. Making such an assumption will not only ensure that confidential information is safe but also will help in growing businesses and, in turn, the country’s economy.

Author:  Hrishikesh Bhise, III Year, B.A. LL.B. (Hons.), National Law Institute University, Bhopal, Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at niharika@khuranaandkhurana.com

References:

[1] Susanna Davis, Introduction: Information, Knowledge and Power

[2] WIPO, What is a Trade Secret?,

[3]AIR 1987 Delhi 372

[4]1869 UNTS 299; 33 ILM 1197 (1994)

[5]Id., at art. 1(2).

[6]Id., at art. 39.

[7]21 UST 1583, 828 UNTS 305

[8]Supra note 4, at art. 39.

[9] RNA Technology & IP Attorneys, Protecting trade secrets in India (May 1, 2008), https://www.lexology.com/library/detail.aspx?g=c83e8a6c-a02e-44ba-8723-94087d2e5e20