Trade Secrets: Codifying Laws in the Digital Age

Anukriti Bhushan
Feb 01, 2022

Introduction

Trade secrets are one of the most vital forms of intellectual property of a company. These secrets can be any practice, design, data, process, knowledge, or pattern which have commercial value attached to them. Trade secrets are not generally known by all the members of the company; only a few members are usually privy ro this information. They are a compilation of information that provides a competitive advantage over other rival businesses. TRIPS agreement has defined “trade secret” under Article 39 as a secret which cannot be accessible by all members of an institution; it shall have a commercial value and the person who is lawfully responsible to keep it as a secret should have taken all possible measures to protect it.

Differing from other forms of intellectual properties which need registration to be protected, trade secrets do not require any sort of registration. People who are lawfully assigned to keep it a secret need to sign non-disclosure agreements which must be included in their employment agreements with the company/institutions. A non-disclosure agreement (NDA) is a type of legal confidential agreement between two or more parties to a contract which forms a confidential relationship between them and breaching of which will lead to compensatory consequences. Trade secrets do not even have a specific time period for protection unlike patents, copyright, and trademark. Once information is saved as a trade secret, it does not need to be renewed. It can remain the same as long as the trade secret owner consents. However, preventive measures must be taken to protect the secrecy of the information.

Need for Policy Reform of Trade Secret in Digital Age

In the 21st century, we have entered the digital era, where cyber theft has been a major drawback for most businesses. Due to globalization countries have eliminated all the global trade barriers to expand their business all over the world in order to raise the country’s economy as well as provide a number of quality options of goods and services to the customers. Hence protecting the most important information of one’s business through mere confidential agreements seems to have weakened the trade. Trade secrets are the oldest form of intellectual property that still does not have separate and proper legislation with provisions related to its infringement and rights of the specific owners.

In the present digital age, data has developed to turn into a valuable instrument, and for protection of this; numerous countries have specific legal provisions for the prevention of trade secrets from being infringed. Notwithstanding, India actually doesn't have any legislation pointed toward the safety of trade secrets. The IT Act, 2000 is not well equipped for fighting offenses such as phishing, spying, bullying, hacking, spreading of fake news, etc. India is certainly in need of a separate data protection act having well emerged modern techniques and laws to combat the problems arising out of recent or future technological advancements.

Before the digital age, trade secrets are physically kept somewhere and there was a chance of theft of that physical material. But nowadays physical presence of the information is not a requirement. The advancement of information technology is a great tool for expanding the business and connecting with customers but it increases the huge risk of data misuse or cyber-crime. The unauthorized use of confidential data of the business is known to be unfair trade practice. Earlier, if someone wants to misuse the information of the company then he/she could commit theft of the physical documents which are available in the office. But now everything is stored in the software or in any digital vault. However, it is not impossible for a cybercriminal or hacker to obtain the trade secrets of a business. The cyber-criminal or hacker can sit in his/her room and can access the data easily. So as a result, it is very important that the owner of the trade secrets should be very careful and protective of the trade secrets of business. There should be very limited access to confidential information. In this time others will try to find out the trade secrets of their competitors but to limit the information to certain people, signing of NDAs, a SWAT team, excellent software will help to reduce the chances of cyber theft. However, SWAT stands for special weapons and tactics. The majority of the problems are because there is no special team in the company who are responsible for the protection of trade secrets and other important information which comes under confidentiality. SWAT can be the specific team for the protection of trade secrets. The courts also did not consider the cases of companies that did not place a person or group in the management of trade security. Therefore, training and capacity building with staff and third parties should be a necessity for life. In this digital era, it is very crucial to protect the data in a very stringent manner.

Physical and electronic securities are crucial to the protection of inventory. Japanese courts have ruled that the company must "exercise restrictions on physical and electronic access" so that information can be considered "confidential" in order to be protected from unfair competition with trade secrets. Companies should also put in place privacy protection and establish physical and professional security and privacy measures.

In one of the leading cases of trade secrets, John Richard Brady v Chemical Process Equipments Pvt. Ltd AIR 1987 Delhi 372, where the plaintiff had shared specialized data and details of the creation unit of the defendant company, the Delhi High Court granted an order of injunction despite the shortfall of NDA between both the parties related in the suit.

International Scenario

While these guidelines may fill in as provisional measures to maintain a trade secret theft, India should enact its specific legislation for trade secrets. As a member of the World Trade Organization and a signatory of the General Agreement on Trade and Tariffs, India will undoubtedly consent to every instrument and annexes to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Article 1(2) of the Agreement states that the Intellectual Property will incorporate protection of undisclosed data. Further, it should also be noted the effective protection against unfair trade practices, as given in Article 10bis of the Paris Convention. The digital world is no companion to trade secrets and the organizations have to accept that others will endeavor to find and discover their trade secrets. Making stricter laws won't just guarantee that secret data is protected yet additionally will help in developing organizations and, thus, the nation's economy.

When comparing the laws of data protection in different nations like European Union's General Data Protection Regulation (GDPR) and United Kingdom's Data Protection Act, residents and citizens in the European Union and the U.K. enjoy different rights, for example, high protection settings of course, so the information isn't accessible freely with no consent of their party and such assent can likewise be taken at any point of time. A few nations are considering trade secrets as a piece of their Intellectual Property system and India is also making critical improvements towards the equivalent. India approved the National IPR Policy to include Trade Secrets in its IP laws and furthermore introduced the draft Personal Data Protection Bill, which protects the rights of the people and/or companies whose information is processed by the state/private entities and furthermore gives solutions for unapproved handling of such information, guaranteeing a viable legitimate structure for all IP rights, including protection of trade secrets. The draft Bill thinks about different angles like foreign investment and the development pace of IT business in India, accordingly guaranteeing a general advancement of Intellectual Property laws in India.

Suggestions

The provisions of Indian law with respect to cyber-crimes are not well equipped to handle disputes in the digital world. With the rapid rise of cyber-crimes, the law also needs to follow up with the changes in society. The country in order to grow has to accept the changes happening every day and should comply with it by amending or upgrading its own legal system. Protection of trade secrets in India is at a very crucial phase. India still being a developing country has huge potential in strengthening its digital backbone. With an ample amount of research and development trade secrets, laws can be drafted as a separate legal framework that would be focusing entirely on the problems and issues of confidential information of an enterprise.

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Anukriti

Assistant Legal Officer, Varal Consultancy DMCC