Justification of Protection of Intellectual Property vis-a-vis Trade Secrets
PAPER V

Submitted By:

SARTHAK KAPILA
ROLL NO. 48,
P.G.D.,I.P.R. – 2014

Justification of Protection of Intellectual Property vis-a-vis Trade Secrets
Intellectual property pertains to any original creation of human intellect such as artistic, literally, technical or scientific creation. Intellectual Property Rights (IPR) refers to the legal rights given by the State to the inventor/creator to protect his invention/creation for a certain period of time. These legal rights confer an exclusive right to the inventor/creator or his assignee to fully utilize his invention/creation for a given period of time.
Countries have laws to protect intellectual property for two main reasons. One is to give statutory expression to the moral and economic rights of creators in their creations and the rights of the public in access to those creations. The second is to promote, as a deliberate act of Government policy, creativity and the dissemination and application of its results and to encourage fair trading which would contribute to economic and social development. The term ‘Intellectual Property’, denotes rights over intangible object of the person whose mental effort created it and refers to a loose cluster of legal doctrines that regulate the uses of different sorts of ideas and insignias. The subject matter of intellectual property is very wide and includes literary and artistic works, films, computer program, inventions, designs and marks used by traders for their goods and services and so on. There are several different forms or areas of law giving rise to rights that together make up intellectual property. They are copyright, right in performance, the law of confidence, patents, registered designs, design rights, trademarks and passing off, trade libel, etc. The term "intellectual property" is reserved for types of property that result from creations of the human mind, the intellect. Interestingly, the term intellectual property in the Convention Establishing the World Intellectual Property Organization, or "WIPO", does not have a more formal definition.
The States that drafted the Convention chose to offer an inclusive list of the rights as relating to:
“Literary artistic and scientific works; performances of performing artists, phonograms, and broadcasts; inventions in all fields of human endeavor; scientific discoveries; industrial designs; trademarks, service marks, and commercial names and designations; protection against unfair competition; and "all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.”
Ideas and knowledge form the quintessential of trade in modern times. The value of a new product lies in the amount of invention, innovation, research, design and testing that go behind its successful production. In the present WTO regime the need to protect these ideas has become paramount as it is these ideas that help business entities to maintain a competitive superiority in the market and further their economic interests. It is for this very reason that corporations, particularly those having multi-national operations need to prevent others from using their inventions, designs or other creations and to use that right to negotiate payment in return for others using them. These are referred to as "Intellectual Property Rights" in the present day parlance. Intellectual property rights are not abstract legal concepts, but a broad ranging means to protect core business assets in a fiercely competitive environment, build and protect good will, avoid significant liabilities to others, and preserve and expand enterprise's equity. The need to protect the intellectual property was realized as early as 1883 when the Paris Convention for Protection of Industrial Property came into existence. The lack of enforcement provisions in the Paris Convention left the international community without the legal apparatus to achieve true consequences. With passage of time, emergence of new concepts in intellectual property and need to harmonize different national legislations the developed countries began pressing for the inclusion of intellectual property as an area of discussion under GATT.
In 1986 the Uruguay Round of negotiations began which concluded on 15th April in Marrakesh with the signing of the 'Final Act'. To achieve the goal of providing and enhancing international standards of intellectual property and to harmonize different national laws on protection of these intellectual properties, for the first time in the context of international trade regulations, "new rules" regarding the international protection of intellectual property were articulated in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The TRIPs Agreement states the object of the agreement as:
"To reduce distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade".
The TRIPs Agreement is an attempt to narrow the gaps in the way these rights are protected around the world, and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO members. In doing so, it strikes a balance between the long-term benefits and possible short term costs to society. Society benefits in the long term when intellectual property protection encourages creation and invention, especially when the period of protection expires and the creations and inventions enter the public domain.
TRIPs covers five broad issues – 1. How basic principles of the trading system and other international intellectual property agreements should be applied, 2. How to give adequate protection to intellectual property rights, 3. How countries should enforce those rights adequately in their own territories, 4. How to settle disputes on intellectual property between members of the WTO, and 5. Special transitional arrangements during the period when the new system is being introduced.
“Intellectual Property law” encompasses a number of distinct legal doctrines. The TRIPs Agreement divided intellectual property rights into the following seven heads 1. Patents, 2. Trademarks, 3. Copyrights, 4. Industrial designs, 5. Layout designs of integrated circuits, 6. Undisclosed information (trade secrets), and 7. Geographical indications.
While each of the intellectual property doctrines is distinct, they all have characteristics in common. Each provides limited property rights in intangible products of investment, intellect and/or labour, whether they be inventive ideas, accumulations of information, original means of expression, business goodwill, or the “persona” of a celebrity. Moreover, each doctrine has been shaped by much the same set of critical public policy concerns.
The primary purpose of intellectual property law is to ensure a rich, diverse and competitive marketplace. To achieve this purpose, intellectual property doctrines all provide property rights as incentives to individuals who create new property rights as incentives to individuals who create new products, services or works of art or literature. Property rights in the fruits of creativity increase the chances that the creator can recoup his investment in the creation process and make a profit from his work. By making creative endeavours financially feasible and potentially rewarding to large numbers of people, intellectual property laws facilitate provision of a variety of creative products and services to the public.
In addition to the economic incentives, however, a competitive market-place requires free access to innovation: competitors need the freest possible use of others’ intellectual creations in order to copy and improve on them. Requiring competitors to “re-invent the wheel” is highly inefficient. The ability to copy results in still greater variety and lower prices in the market-place. Moreover, since the general public is meant to be the ultimate beneficiary of this bounty of products and services, it is important that the general public have as much access to the products of creativity as possible.
Obviously, the goals of giving creators property rights in their works and ensuring that competitors and the public have free use of those works can conflict. Each intellectual property doctrine seeks to achieve the optimal balance between provision of private property rights and retention of public access to the products of creativity, in order to enhance the competitive market-place to the fullest possible extent. Each intellectual property doctrine grants property rights to provide an incentive to create, but limits those rights, seeking to provide the greatest public access without undermining the incentive.
1.1 Concept of Trade Secrets
Since 1991, India has adopted a policy of globalization and liberalization, which encourages the entry of foreign corporations into India and also advocates the policy of removal of trade barriers. Under this policy, India is required to enact sufficient laws in order to extend adequate protection to the interests of the corporations. It is submitted that this policy cannot take effect unless India enacts laws protecting trade secrets that are at par with the laws of other countries.
Adequate protection is required in view of business planning and for safeguarding the rights of employers and employees. In order to effectively conduct their business acquires, manufacturer, suppliers, vendors, corporate officers, directors, and so forth. Yet, we live in an era of corporate downsizing where there exists a general lack of loyalty between employer and employee and where officers, directors, and employees frequently change jobs. Protecting one’s proprietary information in this context becomes an essential aspect of business planning.
In the era of globalization, the organizations are protecting its intellectual property by adopting the available measures in form of patents, copyright, trademark etc. Confidential Information and Trade Secrets too, is a part of this basket, but often neglected. Trade secrets as a form of intellectual property is very significant and garnering wide importance, because in the fierce competition of modern business, failure or success of any company depends on its secrets let them be policies related secrets, technical know-how or information related to their clients. Whilst all businesses have some information that is valuable and which they endeavour to keep secret, they are unaware of how to legally protect such information. Just as other intellectual property rights, trade secrets can be extremely valuable to a company’s growth and sometimes even critical for its survival. In fact, it is only when some rival contender improperly obtains the trade secrets, do companies realise their significance.
Trade secrets law is concerned with the protection of technological and commercial information not generally known in the trade against unauthorized commercial use by others. The policy basis for trade secret protection is the desire to encourage research and development by providing protection to the originator of business information, and also to maintain proper standards of business ethics. The trade secret owner is not granted exclusivity to the information, but rather is only protected against improper acquisition and/or use of the information. As a result, others are free to discover a trade secret by any fair means.
In certain instances where the laws relating to copyright, patents, trademarks and contractual obligations do not protect against the unauthorised use of information or of a concept, the courts have held that a duty to preserve such a confidence may be imposed. This is a difficult area of the law, in that, because it is entirely ‘judge-made’ and very much based on equitable principles, there are a number of uncertainties and, indeed, some of the cases contradict each other. However, most of the case law agrees that there are three essential requirements to satisfy a breach of confidence: a) The first element is that the owner of the confidential information must establish that the information which he seeks to protect is in fact confidential, that it has the necessary quality of confidence about it. The information must be inaccessible to the public. b) The second essential element is that the confidential information must have been imparted in circumstances which imposed an obligation of confidence on the person receiving it. c) Thirdly, the person alleging that a breach of confidence has occurred must be able to show that the person of whom he complains has breached that obligation and has used the information in a manner that was not intended by its owner and is not authorised by him. 1.2 Confidential Information
The action for breach of confidence is broad ranging and has been used in relation to personal, commercial, and technical information, as well as trade secrets, know how, and information about the government. As Keene LJ said, ‘breach of confidence is a developing area of the law, the boundaries of which are nit immutable but may change to reflect changes in society, technology and business practice’.
Because the action is so broad ranging, it performs a number of different roles and protects a variety of interests. In so far as the action provides a space in which ideas can be tested and developed without fear of appropriation, it enables organizations to invest in and carry out research and thus operates as an important supplement to the statutory intellectual property regimes. The action presents the possibility of a person gaining some limited protection as regards intellectual creations which for some reason are not covered by statutory regimes, e.g. business ideas.
There is no such thing as a normatively autonomous body of trade secret law. Rather, trade secret law is merely a collection of other legal norms – contracts, fraud, and the like – united only by the fact that they are used to protect secret information. Neither the fact that a trade secret is information nor the fact that it is a secret provides a convincing reason to impose liability for a non consensual taking. Trade secret law is in this sense parasitic: it depends on a host theory for normative support.
Until recently the action for breach of confidence has largely fallen outside the remit of international treaties. This situation changed as a result of the fact that the 1994 TRIPS Agreement requires members to afford protection to those who lawfully control ‘undisclosed information’. Article 39 requires information to be protected if it is secret, has commercial value because it is a secret, and has been subject to reasonable steps to keep it secret.
However confused the details of the law relating to breach of confidence may be, its basic fundamental framework is now well established. According to the seminal case of Coco v. Clark, in order to establish a claim for breach of confidence, the claimant must show that: i) the information is capable of being protected; ii) the defendant owes the claimant an obligation to keep the information confidential; and iii) the defendant used the information in a way that breached that duty.
Law of confidence is gaining importance to a great extent in modern times. Its object is to preserve secrets and confidences. Its importance has been recognized globally and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) also approved it as one of the forms of intellectual property rights and provided protection to it. Even though, the law of confidential information is relevant in many fields of law, it is more significant in relation to trade secrets and business information. It is concerned with information and not with form.

Section 7 of Part II of the Agreement on TRIPs deals with undisclosed information. The object of this section is to create a system by which the holders of secret information are not forced to part with that to Government or other bodies.
Article 31 (1) obligates the member countries to protect undisclosed information in accordance with Article 39 (2). Article 39 (2) defines what constitutes secret information.
“Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:- * Is secret, in the sense, that is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; * Has commercial value because, it is secret; and * Has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”
The Agreement on TRIPs imposes further obligation in relation to pharmaceutical or agricultural chemical products under Article 39 (3). “Members, when requiring, as a condition of approving the marketing of pharmaceuticals or of agricultural chemical products which utilize new chemical entities the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair chemical use. In addition members shall protect such data against disclosure, except where necessary to protect the public or unless steps are taken to ensure that the data are protected against unfair commercial use.”
Therefore the subject matter of protection under Article 39 (3) is test data. This information is neither ‘created’ nor ‘invented’. For this reason, the TRIPs Agreement does not define any substantive standard for granting protection (like inventive step or novelty), but simply mandates protection when obtaining the data involved ‘a considerable effort’.
However, the text of TRIPs is vague about the type of effort involved (technical, economic) and also with respect to its magnitude (when would it be deemed ‘considerable’).
There are four main classes of information regarded as confidential, namely trade secrets, personal confidences, government information and artistic and literary confidence. In this paper we are now concerned with trade secrets related to business, commercial or industrial activity.
1.3 Need to Protect Confidential Information “The old adage ‘knowledge is power’ is coming to have its commercial counterpart in the more sordid but equally valid aphorism ‘information is money’. In a nation that is entering the so called post-industrial information society, information has quite literally become Capital.”
This quote could sum up why Trade Secrets or confidential information must be protected against infringement or violation. The dependence of economies on possession of land or machinery and the importance of that dependence is now out-weighed by the importance of dependence upon what might be called ‘intellectual capital’. Economies which have the knowledge to produce things more efficiently, to develop new technology to do this and to improve efficiency overall, gain the competitive edge. Intellectual capital or, quite simply, ideas, are paramount in this. As soon as an idea is shared with a third party, it is open to attack. It is essential that commercial secrets can be protected against disclosure and that the courts impose this obligation to hold such information confidential.
Obviously, if this prohibition on releasing information had no exceptions, then economies would stagnate, and so the courts have balanced these two opposite ends of the spectrum. In general, the court will not allow information which has been disclosed in confidence to be used in a way that is inconsistent with the purpose for which the information was imparted. Neither will the courts allow use of information which was stolen from its owner.
On the other hand, no one will be prevented from using information which is already in the public domain. If someone can prove that they have independently carried out their own research in developing a product, the courts will not grant an injunction stopping them from using that product even if it has already been developed by another company. No one can be stopped from ‘reverse engineering’ a product; that is, no one can be stopped from purchasing at market value any product in the market place and working backwards to find out how it is manufactured. Obviously, if patent protection exists in respect of the product, this is a different matter, since it cannot be made without licence of the owner of the patent, but in all other cases reverse engineering is permitted. Furthermore, the courts have always allowed an employee to use his skill and experience which he has gained while employed; this is as opposed to using the secrets of his former employer.
Trade secret or confidential information is a very delicate and important part of today’s intellectual property world. The basic principle behind the protection of trade secret is to prevent ‘Theft’ of information by unfair means or commercially unreasonable means. Some information can be very fatal for a company if it reaches his opponents. Trade secret protection is still a very weak subject in most countries. Only few developed countries have statutory laws for the protection of trade secret. Many of the countries now comprehend the need for a strong trade secret protection law. In India there is no statutory protection of trade secrets, the only protection available is by way of common law doctrines as imbibed in Sec. 27 of the Indian Contract Act, 1872. The legal framework in India has been dealt with further under sub-heading National and International Perspectives.
1.4 What Information Can Be Protected?
The first factor that must be shown in a breach of confidence action is that the information is capable of being protected. Before being in a position to do this, it is necessary to identify the information in issue. As O’Connor J said, ‘it was essential that the claimant should make it absolutely clear and certain what it was that he alleged to be confidential and which he sought to protect’.
Failure to identify the information may also lead the court to refuse to grant an injunction. In Suhner v. Transradio the claimants gave the defendant 246 drawings saying that about 100 of the documents contained confidential drawings and that part of the information in the other 146 documents was confidential. The court refused to grant an injunction primarily because ‘it was very difficult to know precisely what information it is which the plaintiffs say is confidential’. Laddie J reiterated this position in the Ocular Sciences v Aspect Vision where he said that the claimant should give full and proper particulars of all confidential information that he intended to rely upon. The reason for this was that unless the confidential information was properly identified, the injunction might be of uncertain scope and difficult to enforce. On this basis Laddie J said that, if the claimant failed to give proper particulars, it was open to the court to infer that the purpose of the litigation was harassment rather than the protection of the claimant’s rights. On this basis the action could be struck out as an abuse of process.
While there are very few restrictions placed on the subject matter that is capable of being protected and the format that the information needs to take, there are four limitations placed on the type of information that may be protected under the action. These are where the information is trivial, immoral, vague, or in public domain.
1.4.1 Trivial Information
The first limit placed on the type of information that is protected by breach of confidence is that the courts may not protect information that is trivial. In Coco v. Clark Megarry J said he doubted ‘whether equity would intervene unless the circumstances are of sufficient gravity; equity ought not to be invoked to protect trivial tittle-tattle, however confidential’. In the context of trade secrets, the courts have occasionally suggested that, to be protectable an idea must be economically valuable or ‘commercially attractive’.
1.4.2 Immoral Information
The courts will not enforce obligations of confidentiality relating to matters that are grossly immoral.
1.4.3 Information That Is Vague
The information protected by breach of confidence is detailed and specific. Information of this nature presents few problems. Thus, detailed plans of a prototype engine shown by an inventor to a manufacturer or a detailed formula for a new pharmaceutical may be protected. However, breach of confidence also applies to more general ideas and concepts such as a proposal for a new television series. Law will not protect information that is vague or general.

1.4.4 Information in the Public Domain
One of the most important restrictions placed on the information that is protected by breach of confidence is that the action does not apply to material that is in the public domain. The information that is in the public domain is not capable of being treated as confidential. There can be no breach of confidence in revealing to others something which is already common knowledge. This means that to be protected the information must be relatively secret.
1.5 What is trade secret?
A trade secret refers to data or information relating to the business which is not generally known to the public and which the owner reasonably attempts to keep secret and confidential. Trade secrets generally give the business a competitive edge over their rivals. Almost any type of data, processes or information can be referred to as trade secrets so long as it is intended to be and kept a secret, and involves an economic interest of the owner. For example, a business may have certain internal business processes that it follows for its day-to-day operations that give it an edge over its competitors. This could be regarded as a trade secret. Customer lists, business information, employee details, financial records, data compilations, business plans and strategies, formulae, designs, drawings, etc. could all amount to trade secrets.
The TRIPs Agreement is the first multilateral instrument dealing with trade secrets or undisclosed information. Prior to it there existed only the general obligations in respect of unfair competition found in Article 10 bis of the Paris Convention. That link to the Paris Convention in Article 39(1) was used to justify the inclusion of this section in the Trips Agreement. Article 39(1) reads: ‘In the course of ensuring effective protection against unfair competition as provided in Article 10 bis of Paris Convention (1967)’. A plain reading of this provision might lead the reader to believe that only those WTO members who were party to the Party to the Paris Convention of 1967 have obligations under this. But this is not the case, as even WTO members not party to the Paris Convention must comply with Article 10 bis, as provided under Article 2(1) of TRIPS.
Article 39(2) is the operative part of the provision. Specifying the conditions governing any disclosure of the information concerned: a) The information is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question. This provision incorporates an objective standard of secrecy by providing that the relevant information must be ‘not generally known’ or ‘readily accessible’. The extent of secrecy may be determined by comparing it with the knowledge of a person ‘skilled in the art’ who has access to normal sources of specialised information. b) The information must have commercial value because it is secret, i.e. the information must give a competitive advantage. The information need not necessarily be able to put into practice in a valuable way. The fact that competitors and/or consumers may perceive such information as having value because it is kept secret may be sufficient to give its holder a competitive advantage. c) The information must have been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. The provision is vague in as much as it doesnot indentify the type of steps that could be taken, such as encryption, safes, division of world, contractual restrictions, etc.

Whenever these conditions are met, persons in control of the information must, under national law, have the possibility of preventing such information from being disclosed to, acquired by or used b others without their consent in a manner contrary to ‘honest commercial practices’. This clearly indicates that the right to prevent such acts only arises when the means used are condemnable. That is, there is not an absolute protection against non-authorised disclosure, acquisition and use of information, but only against acts made in a condemnable manner.
North American Free Trade Agreement (NAFTA) defines a trade secret as “information having commercial value, which is not in the public domain, and for which reasonable steps have been taken to maintain its secrecy.”
In the United States, trade secrets are not protected by law in the same manner as trademarks or patents, they are protected under State laws. Most States have adopted the model trade secret law known as the Uniform Trade Secrets Act , 1979 (UTSA). Under the UTSA, trade secrets are defined as: “information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
The Restatement of Unfair Competition, 2002 defines ‘trade secret’ as ‘a trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.’
It is important to bear in mind that a trade secret need not be something that is novel nor should it have any real or intrinsic value to be protected. The only important requirement is that it must be a secret.
Unlike other forms of intellectual property, trade secrets are essentially internal instruments, the responsibility for their protection remaining with the owner of the secrets. They are not disclosed to anyone including the Government and are kept confidential. The most quoted trade secret and the one which has established the credibility that trade secrecy can be ensured is the case of the Coca-Cola formula, which is kept locked in a bank vault in Atlanta, can be opened only by a resolution of the company's board and is known to only two employees at the same time. The public has no access to the names of those employees. It is obvious that such extreme systems and standards for protection of trade secrets are not practised by many other corporations.
Factors which must be considered in determining whether particular information constitutes a trade secret are: Firstly, the extent to which the information is known to the outside world; secondly the extent to which the information is known to the employees; thirdly, what measures are taken by the company to protect the secret; fourthly, the value of the information to the business and to the competitors; fifthly, the amount of time and money spent in developing the information; and sixthly, the ease or difficulty with which the information can be acquired and duplicated by others.
The above list however is not exhaustive and it would in the end depend upon the facts of the case.
Even though keeping a particular invention or information secret has its advantages. The most important one is of having the indefinite time period for which one may use it and consequently prohibit others from using it. There is the accompanying risk of the trade secret passing on from the inventor into the public domain. Moreover, since trade secrets are not registered, it becomes difficult for the inventor to prove that he came up with the trade secret. In most intellectual property cases, the other party claims that he or she, in fact, created or used the item or information first and that any subsequent use is unauthorized. Also, if the competitor acquires the secret by lawful and proper means or by the process of reverse engineering the holder would have no right, while in case of patents even though the protection offered is for a limited period of 20 years no person can duplicate the patented product (in case of a product patent) or use the same method (in case of a process patent) till the protection period expires.
1.6 Significance of Trade Secrets
Trade secrets in the industrial economy have increased greatly in the past few years, for a number of reasons. There are mainly two reasons for that, one among them is that other forms of intellectual property like Patent, Trademark and Copyright have an element of uncertainty as compared to Trade Secret. Secondly, trade secrets have gained importance because, in many fields, the technology is changing so rapidly that it has surpassed the existing laws intended to encourage and protect inventions and innovations.
Another significant factor which has enhanced the value of trade secrets is the relative ease of creating and controlling trade secret rights. There are no bureaucratic delays and no multiyear waits for government grants, such as those for patents. Trade secret rights, in contrast, can be established by the explicit conduct or agreement of the interested parties. A trade secret right starts upon the creation of the idea in some concrete form, and continues as long as secrecy is maintained. Protection of information such as ideas or information which does not qualify to be protected as intellectual property within the legal framework Intellectual Property Laws of the land can be protected by Trade Secrets. They also have the advantage of being lasting forever, again, as long as secrecy is maintained.
Of course, trade secrets have negative aspects. They are a volatile form of property, and they terminate when secrecy is lost. Also, they require constant vigilance to protect them. Nevertheless, trade secrets play a major role in protecting innovations and establishing rights to use new technology. It is thus important for the intellectual property practitioner to be alert to the intricacies of this large body of trade secret law.
Trade secrets law is concerned with the protection of technological and commercial information not generally known in the trade against unauthorized commercial use by others. The policy basis for trade secret protection is the desire to encourage research and development by providing protection to the originator of business information, and also to maintain proper standards of business ethics.. The trade secret owner is not granted exclusivity to the information, but rather is only protected against improper acquisition and/or use of the information. As a result, others are free to discover a trade secret by any fair means.
1.7 Rationale for Inclusion in TRIPs
TRIPs agreement aimed at providing internationally accepted standards of protection to creation of human intellect (intellectual property). The developed countries wanted to further and protect their economic interests and one such way was to provide adequate protection to the capitalists, which could be achieved to a large extent by protecting their creations. Trademarks, patents etc. would have achieved this but that was not enough, corporate houses had been for long pressing upon their respective governments to provide protection to their trade secrets which form the back bone of their operations. Trade secrets also had an added advantage, they would be the sole possession of the holder as long as he is able to keep it a secret and even if the competitor acquired the secret through lawful means the original holder could always file a patent application. United States of America was the first country to enact a statute dealing with trade secrets. The Act is known as the Uniform Trade Secret Act (UTSA). The UTSA sought to provide some consistency in trade secret law that, until recently, was protected only by state laws. Most European and developed countries have based their statutes on the UTSA. However, with liberalization and globalization there emerged a need to provide an internationally accepted framework for the protection of these secrets. By including them under the TRIPs was the best way out. The second wave of argument forwarded for their inclusion in TRIPS is that they are a result of human intellect and thus, necessarily fall under the domain of TRIPs.
1.8 Confidential Information versus Trade Secrets
A Trade Secret is some information or “secret” that is important to the business and is not known to the public. It is a term commonly used to cover information that has commercial value. The law on “trade secrets” is really about the protection of Confidential Information. Though there is no clear distinction between the both. At times both the concepts are so intermingled and overlapped that it becomes difficult to draw a line. The terms “trade secrets” and “confidential information” have been used somewhat interchangeably by the courts. “Trade secrets” generally refers to information relating to more technical matters such as secret processes or formulae; and “confidential information” relates to non-technical matters such as business plans or pricing information. Although many concepts and ideas may be public knowledge, courts have upheld confidential/trade secret information protection for (i) specific ways to implement ideas and, (ii) combinations of known concepts and ideas. Novelty and invention are not required.
In Faccenda Chicken Ltd v Fowler, the English Court of Appeal distinguish between trade secrets and two degrees of confidential information: ‘highly confidential information’ which will be protected after termination and employment relationship and ‘less confidential information’ which will not. Goulding J held that information would only be protected if it can properly described as a trade secrets, is in all the circumstances of such a highly confidential nature as to require the same protection as trade secrets. In creating the trichotomy of ‘trade secrets’, highly confidential information’, and ‘less confidential information’, the Court created a new difficulty for other courts to identify where the employers general knowledge ends and where employers general knowledge begins.
This difficulty was well illustrated in Montour Liee v Monarch Messenger Services Ltd Houlding where the court on similar fact situation of Faccenda held that confidential information obtained during the course of employment would be in nature of trade secrets and have to be protected. Finally in Ocular Sciences v Aspea Vision Cares, Laddie L rejected the notion that there exists any class of information that is so trivial or commonplace that an employee is free to disclose to anyone including a competitor. Such disclosure would breach an employee’s implied duty of fidelity as postulated in Hivac Ltd v Park Royal Scientific Instruments Ltd .But the latter case like AT Poten (Gloucester Plating) Limited v Horton and Dranez Anstalt v Hayek again held the classification laid down in Faccenda without referring to abovementioned cases.
Though case law does not always define clearly whether trade secrets are synonymous with confidential information or proprietary information. Nevertheless, the case law does suggest that trade secrets and confidential information are essentially identical concepts.
1.9 Trade Secrets and Traditional Knowledge
Trade secret law has important implications for the traditional knowledge debate. Trade secret law offers a practical path forward in the current international impasse; it can protect a subset of traditional knowledge that is relatively secret—i.e., not publicly available.

1.9.1. The Basics of Trade Secret Law
While its precise origins are disputed, the modern form of trade secret law is a nineteenth-century creation of Anglo-American courts. Given trade secret law’s relatively recent vintage and common law origins, it is not firmly entrenched outside of common law countries. This is beginning to change, however, as TRIPS and other bilateral and regional agreements require countries to protect trade secrets.
Typically, trade secret law imposes three basic requirements: (1) a broad subject matter requirement of information that derives actual or potential economic value because it is not generally known; (2) the trade secret holder took reasonable precautions under the circumstances to keep the information secret; and (3) the defendant obtained the secret by violating an express (e.g., contractual) or implied duty, or though other “improper means.”
Significantly, trade secret law encompasses far broader subject matter than patent law. While patents cover inventions that are useful, novel, and non obvious in light of the existing knowledge, “virtually any useful information can qualify as a trade secret.” The information need not be novel or non obvious. Even very slight improvements to known processes or discoveries of what does not work (“negative know-how”) may qualify. The information need not have actual economic value; potential economic value is sufficient. The information need not be “technological” in nature, as the law covers business information like customer lists, financial projections, and marketing plans. And unlike patent law, neither the identification of individual trade secret creators nor a formal application process is required for trade secret protection.
Trade secret law is thus a useful reminder that for over a century, the same corporate entities that contest the protection of traditional knowledge because it is old, communally and incrementally developed, lacking in novelty, and its precise individual creators unknown, have regularly invoked the protections of trade secret law to protect information that is . . . old (e.g., the century-old Coca-Cola formula), communally and incrementally developed, lacking in novelty, and its precise individual creators unknown.
For all its breadth, however, trade secret law offers weaker exclusionary rights than patent law. Trade secrets are not property rights against the world in the traditional sense, because the right to exclude applies only when information is obtained improperly. Where a party develops the idea independently or reverse engineers a lawfully obtained product to learn the secret, no liability attaches, and that entity can do what it wants with the information. By the same token, multiple entities may simultaneously “own” the same trade secret if they developed it independently. This is an important difference from patent law, and one that makes trade secret law more suitable for traditional knowledge, where multiple neighbouring groups may have long used the same knowledge.
Another important difference from patent (and copyright) law is that trade secret protection is not limited to a specific term of years, so longstanding traditional knowledge may still qualify. But trade secret law does, as the name suggests, apply only to secret information. Secrecy here, however, means relative secrecy, not absolute secrecy. In other words, confidential information can be shared with others who are aware of its confidentiality without losing its status as a trade secret. Once the information has “escaped into the mainstream of public knowledge,” however, protection ends. Generally, the publication of the trade secret, for example, in an academic journal or in a patent, destroys it. Thus, if information qualifies for patent protection, an inventor must elect either patent or trade secret protection. In other instances, the decision to publicly disclose is out of the originator’s hands. For example, one who independently develops or reverse engineers the secret can do what she wants with it, including publicly disclosing it, which defeats even the original trade secret holder’s right.
Although trade secret law overlaps to some degree with contract principles, it departs in significant ways. Notably, liability can extend to strangers not in privity with the plaintiff, such as improper acquirers, those who acquire a trade secret by accident or mistake, and those who knowingly or negligently obtain information from one in privity with the plaintiff. In addition, trade secret law offers a stronger array of remedies than contract law, depending on the circumstances. These include damages based on the defendant’s gain, injunctive relief prohibiting further use and disclosure of the information, and, in some cases, criminal penalties.

1.9.2 Traditional Knowledge and Three Paradigmatic Trade Secret Situations
While trade secret protection is not as “barrier”-like as patent protection, it can protect relatively secret traditional knowledge. Not only does trade secret law lack many of patent law’s subject matter, temporal, monetary, and other constraints; it may also accommodate the concerns of those traditional knowledge holders who want to control particular uses of their knowledge, as well as those who are interested in obtaining a share of the profits from commercialization.

One point of clarification: as previously noted, the term traditional knowledge has been used to refer to a vast and varied body of information. It has been used, for example, to refer not only to knowledge possessed by specific indigenous and local communities. The term has also been used to describe knowledge that is indigenous to a particular region or country and is generally known by many segments of society—for example, certain aspects of Ayurvedic medicine. Trade secret law would not apply to such information.
Toward the other end of the spectrum, however, traditional knowledge may be known within one particular indigenous or local group, or only by specific members of a particular group (e.g., healers), or, more commonly and complicatedly, by a discrete number of neighbouring groups within a geographical area. It is this subset of traditional knowledge for which trade secret law has something to offer.
In the modern commercial context, trade secret rights generally arise in three kinds of interactions: (1) where there is a contractual agreement; (2) where, even in the absence of a contract, the parties’ relationship or conduct leads to the inference that the information was disclosed in confidence and any use or disclosure beyond the boundaries of confidence is wrongful; and (3) where a party uses improper means to acquire the information (sometimes described as “competitive intelligence” cases). Each of these situations is potentially relevant to traditional knowledge holders. Thus trade secrets can prove to be an effective tool for protection of traditional knowledge.
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[ 2 ]. Bhaskar, S.M and Tripathi, R.C, “The Electronic Transactions and IPR’s : A need for Digital Time Stamping”, 46 Journal of Indian Law Institute (2004)
[ 3 ]. http://www.wipo.int/about-ip/en/iprm/pdf/ch1.pdf visited on 24.03.2013
[ 4 ]. Article 2, Convention Establishing the World Intellectual Property Organization, Signed at Stockholm on July 14, 1967;
[ 5 ]. Ibid
[ 6 ]. 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT).
[ 7 ]. Preamble, TRIPs Agreement.
[ 8 ]. Id, Article 1.2
[ 9 ]. Barrett Margreth, Intellectual Property Cases and Materials, American Case Book 2nd Edn,, West Group, 2001
[ 10 ]. Abhinav kumar, Pramit Mohanty & Rashmi Nandakumar, “Legal Protection of trade Secrets: Towards a Codified regime”, 2006 JIPR 397-408.
[ 11 ]. Ibid
[ 12 ]. Kewanee Oil Company v Bicron Corp., 416 U.S. 470 (1990).
[ 13 ]. Douglas v. Hello! (2001) QB 967
[ 14 ]. Wheatley v. Bell, (1984) FSR 16
[ 15 ]. R.Bone, “A New Look at Trade Secret Law: Doctrine in search of a Justification” (1998) 86 CAL LAW REV 241.
[ 16 ]. R Krasser, ‘The Protection of Trade Secrets in the TRIPS Agreement’, in Beier and Shticker, at 216-25.
[ 17 ]. (1969) RPC 41
[ 18 ]. Sarma Ram, Commentary on Intellectual Property Laws, Wadhwa Nagpur Edn. 2007, Vol 1.
[ 19 ]. Article 39 (2), Agreement on TRIPs.
[ 20 ]. Id, Article 39 (3).
[ 21 ]. Supra, note 17
[ 22 ]. Robert A Spanner’s book Who Owns Innovation- The Rights and Obligation of Employers and Employees, published in 1984 in the US as cited in Paul Lavery, Commercial Secrets, Published by Roundhall, Sweet & Maxwell.
[ 23 ]. L. Bently & B. Sherman, Intellectual Property Law, Oxford Publishers, 3rd Edition, 2009 at 1009.
[ 24 ]. PA Thomas v. Mould, (1968) QB 913
[ 25 ]. (1967) RPC 329
[ 26 ]. (1997) RPC 289
[ 27 ]. Supra, note 22
[ 28 ]. (1969) RPC 41
[ 29 ]. Ibid
[ 30 ]. Ibid
[ 31 ]. Supra, note 11
[ 32 ]. Gervaris Daniel. The Trips Agreement: Drafting History and Analysis, Sweet & Maxwell, London (1998) at 185.
[ 33 ]. Article 39(2)(a)
[ 34 ]. Supra, note 31
[ 35 ]. Article 39(2)(b)
[ 36 ]. Supra, note 9
[ 37 ]. Article 39(2) clause (a), (b) and (c)
[ 38 ]. NAFTA, Article 1711.
[ 39 ]. Section 1(4), Uniform Trade Secrets Act, 1979.
[ 40 ]. Section 39, Restatement of Unfair Competition, 2002.
[ 41 ]. www.worldofcoca-cola.com/secret-vault.htm, visited on 18th march, 2013
[ 42 ]. Cybertek Computer Products Inc. v Whitfield, California Superior Court, 1977. 203 U.S.P.Q. 1020.
[ 43 ]. Supra note 11.
[ 44 ]. (1986) I All ER 617
[ 45 ]. Canavest House ltd. v. Lett, (1984), 4 CIPR 103 as cited in Abhinav kumar, Pramit Mohanty & Rashmi Nandakumar, “Legal Protection of trade Secrets: Towards a Codified regime”, 2006 JIPR 397-408.
[ 46 ]. Poeton Ltd. v. Horton, [2001] FSR 169 as cited in Abhinav kumar, Pramit Mohanty & Rashmi Nandakumar, “Legal Protection of trade Secrets: Towards a Codified regime”, 2006 JIPR 397-408.
[ 47 ]. (1984) 2 CPR (3d) 235 as cited in Abhinav kumar, Pramit Mohanty & Rashmi Nandakumar, “Legal Protection of trade Secrets: Towards a Codified regime”, 2006 JIPR 397-408.
[ 48 ]. Supra, note 43
[ 49 ]. [1997] RPC 289
[ 50 ]. [1949] Ch 169
[ 51 ]. [2000] ICR 1208
[ 52 ]. [2002] 1 BCLC 693, as cited in Abhinav kumar, Pramit Mohanty & Rashmi Nandakumar, “Legal Protection of trade Secrets: Towards a Codified regime”, 2006 JIPR 397-408.
[ 53 ]. Supra, note 43
[ 54 ]. Deepa Varadarajan, Article “A Trade Secret Approach to Protecting Traditional Knowledge” page no. 396.
[ 55 ]. A. Arthur Schiller, “Trade Secrets and the Roman Law: The Actio Servi Corrupti”, 20 COLUM. L. REV. 837, 837-38 (1930).
[ 56 ]. Mark A. Lemley, “The Surprising Virtues of Treating Trade Secrets as IP Rights”, 61 STAN. L. REV. 311, 313-14 (2008).
[ 57 ]. Robert P Merges, Peter S. Menell & Mark A. Lemley, Intellectual Property in the new technological age 36-37 (5th ed. 2010). The Uniform Trade Secrets Act (UTSA), enacted in some form by most states, defines trade secrets as follows: Information, including a formula, pattern, compilation, program, device, method, technique, or process that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
[ 58 ]. Supra note 53 at 397.
[ 59 ]. Id, at 398.