Can trade secrets be protected in India?

Last Updated at: March 10, 2020
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Intellectual property - Can trade secrets be protected in India

Trade secrets are a vital part of Intellectual Property rights of a company. These trade secrets have a direct relationship to the growth of the company. Usually, these refer to various aspects such as device, instrument, data, design, formula, practice, etc. depending on the genre of business and are not meant to be disclosed to any third person. You will understand the importance of protecting trade secrets from here.

Trade secrets are considered to be a part of the Intellectual Property of the company as it amounts to the company’s growth. Generally, a trade secret is referred to as a practice, process, formula, design, device, instrument or a collection of data or information regarding the business which will not be disclosed to the public. The owner tries to keep it as a secret and confidential as it derives economic value and advantage among other competitors in the market. Thus, the trade secret is defined as the secret which is not generally accessible by people and must have a commercial value as a secret and the owner should take steps to maintain it. For instance, the popular beverage company Coco Cola’s Coke formula; KFC’s fried chicken that the company says “secret herbs” is a formula that is maintained as trade secrets

Browse through our articles on servies provided at Vakilsearch, and just let us know if we can help you with your company registration or tax filing or trademark registration.

 

The protection of trade secrets is one of the important aspects in any country as it helps in Foreign Direct Investment too. Foreign investors ensure their trade secrets are well maintained before they make any investment in the country. The protection of this trade secret is challenging for the Indian Government as there is no proper legislation for the protection of trade secrets and hence India follows the old common law principles.

Common law principles

Yes, trade secrets can be protected in India. The trade secrets protection is approached on the basis of equity principle, breach of confidence and contractual obligations.

  1. If the owner has revealed the trade secret to another independent person for the purpose to run the business in his absence, that person is not allowed to take advantage of it and involve in unfair trade practices. Thus, the employees who have access to trade secrets should be educated for the protection of trade secrets on the basis of equity principle

2. The other person may be a business partner or in a key position, who knows the trade secret should also maintain it as a secret as the owner had full confidence and revealed the trade secrets; he is obliged to maintain it. Thus the protection of the trade secret is not restricted to the owner alone but also the other person who knows it. If any person makes an attempt to breach that confidence, an injunction will be sent by the court.

3. The employer should enter into a non-disclosure agreement or NDA with the person who knows the business secret so that he will be under contractual obligations not to reveal them.

Also, the Indian court tries to protect the trade secret through the law of contracts. So the company usually enters into a contract with its employees stating that they are not supposed to reveal the trade secrets during the course of employment or even after their termination. In case of the absence of trade secrets in the contracts, an injunction will be issued on the basis of equity rule by the courts

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The various legislations that involve the protection of business secrets are as follows: 

  1. If the data containing the details of the clients used in the literary work, if the person lets others use his work but has not revealed the facts then the other person uses the same concept and idea, it leads to copyright infringement. On the other hand, where the person to whom the trade secrets are shared starts a business and gives competition to the real owner, it amounts to copyright infringement. In this entire scenario, the trade secrets are revealed, the court will punish them under the Copyrights Act, 1957 with the imprisonment for a minimum of 6 months to three months.

2. If a person intentionally loots the trade secret by tampering the computer languages, code, security or programme, then the court may punish them under Information Technology Act, 2000 with imprisonment up to 3 years or with the fine of five lakh rupees or both.

3. Any data which contain the trade secret is moved to others by way of dishonesty or fraudulent behaviour of the employee. It amounts to the criminal breach of trust and will be punished under IPC for not more than seven years or fine or both.

The following documents should be signed for protecting the trade secrets

  • Non-competition agreement and employee confidentiality agreement
  • Applicability of post-employment agreement
  • Non-disclosure agreement
  • Authorised disclosure by the Board of directors of the company
  • Termination of agreement and statement
  • Invention assignment agreement and its applicability
  • Injunction relief agreement

Well, trade secrets have to be safeguarded in India according to the Intellectual Property law practiced in the country. The Indian court protects trade secrets via the law of contracts. There are a few set of documents associated with the protection of trade secrets. You should have these agreements intact and adhere to the law.

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Can trade secrets be protected in India?

2511

Trade secrets are a vital part of Intellectual Property rights of a company. These trade secrets have a direct relationship to the growth of the company. Usually, these refer to various aspects such as device, instrument, data, design, formula, practice, etc. depending on the genre of business and are not meant to be disclosed to any third person. You will understand the importance of protecting trade secrets from here.

Trade secrets are considered to be a part of the Intellectual Property of the company as it amounts to the company’s growth. Generally, a trade secret is referred to as a practice, process, formula, design, device, instrument or a collection of data or information regarding the business which will not be disclosed to the public. The owner tries to keep it as a secret and confidential as it derives economic value and advantage among other competitors in the market. Thus, the trade secret is defined as the secret which is not generally accessible by people and must have a commercial value as a secret and the owner should take steps to maintain it. For instance, the popular beverage company Coco Cola’s Coke formula; KFC’s fried chicken that the company says “secret herbs” is a formula that is maintained as trade secrets

Browse through our articles on servies provided at Vakilsearch, and just let us know if we can help you with your company registration or tax filing or trademark registration.

 

The protection of trade secrets is one of the important aspects in any country as it helps in Foreign Direct Investment too. Foreign investors ensure their trade secrets are well maintained before they make any investment in the country. The protection of this trade secret is challenging for the Indian Government as there is no proper legislation for the protection of trade secrets and hence India follows the old common law principles.

Common law principles

Yes, trade secrets can be protected in India. The trade secrets protection is approached on the basis of equity principle, breach of confidence and contractual obligations.

  1. If the owner has revealed the trade secret to another independent person for the purpose to run the business in his absence, that person is not allowed to take advantage of it and involve in unfair trade practices. Thus, the employees who have access to trade secrets should be educated for the protection of trade secrets on the basis of equity principle

2. The other person may be a business partner or in a key position, who knows the trade secret should also maintain it as a secret as the owner had full confidence and revealed the trade secrets; he is obliged to maintain it. Thus the protection of the trade secret is not restricted to the owner alone but also the other person who knows it. If any person makes an attempt to breach that confidence, an injunction will be sent by the court.

3. The employer should enter into a non-disclosure agreement or NDA with the person who knows the business secret so that he will be under contractual obligations not to reveal them.

Also, the Indian court tries to protect the trade secret through the law of contracts. So the company usually enters into a contract with its employees stating that they are not supposed to reveal the trade secrets during the course of employment or even after their termination. In case of the absence of trade secrets in the contracts, an injunction will be issued on the basis of equity rule by the courts

Get Your Legal Documents Prepared by Experts

The various legislations that involve the protection of business secrets are as follows: 

  1. If the data containing the details of the clients used in the literary work, if the person lets others use his work but has not revealed the facts then the other person uses the same concept and idea, it leads to copyright infringement. On the other hand, where the person to whom the trade secrets are shared starts a business and gives competition to the real owner, it amounts to copyright infringement. In this entire scenario, the trade secrets are revealed, the court will punish them under the Copyrights Act, 1957 with the imprisonment for a minimum of 6 months to three months.

2. If a person intentionally loots the trade secret by tampering the computer languages, code, security or programme, then the court may punish them under Information Technology Act, 2000 with imprisonment up to 3 years or with the fine of five lakh rupees or both.

3. Any data which contain the trade secret is moved to others by way of dishonesty or fraudulent behaviour of the employee. It amounts to the criminal breach of trust and will be punished under IPC for not more than seven years or fine or both.

The following documents should be signed for protecting the trade secrets

  • Non-competition agreement and employee confidentiality agreement
  • Applicability of post-employment agreement
  • Non-disclosure agreement
  • Authorised disclosure by the Board of directors of the company
  • Termination of agreement and statement
  • Invention assignment agreement and its applicability
  • Injunction relief agreement

Well, trade secrets have to be safeguarded in India according to the Intellectual Property law practiced in the country. The Indian court protects trade secrets via the law of contracts. There are a few set of documents associated with the protection of trade secrets. You should have these agreements intact and adhere to the law.

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