Business in the modern world is a major force in the development trajectory of a state. There can be a number of businesses that represent the same field, but those businesses have different characteristics and strategies. Therefore, each business has its own unique characteristics and on top of that you can see a united consumer community around that business. Often these businesses differ from each other in the uniqueness of the trade secrets they follow. Therefore, there are certain laws to protect trade secrets in order to create fair business competition in society. Securing trade secrets has become a challenge in the face of globalization and the development of information technology. Therefore, the protection of trade secrets from this article is intended to be considered from a business law perspective.
2.What is a Trade Secret?
According to the World Intellectual Property Organization's (WIPO) website, a trade secret is an intellectual property right to confidential information that can be sold or licensed. It states that there are three basic requirements that must be met in order to become a trade secret.
Commercial value since confidential
Only a limited number know the trade secret.
Have taken reasonable steps to protect trade secrets.
Different methods can be used to protect, seize and disclose trade secrets under each jurisdiction, but the above three features have been identified as common features of a trade secret. In discussing what trade secrets belong to, it can be pointed out that this can be identified under the sections.
Technical Information: Manufacturing Process, Experimental Research Data, Software Algorithms.
Commercial Information: Distribution Methods, List of Suppliers and Clients, Advertising Strategies.
In addition to the above conditions, Financial Information, Formulas, Recipes and source codes are also included.
According to RK Dewan and Company Website, "A trade secret is a process by which an organization keeps a secret to gain a competitive advantage, such as IT knowledge, customer lists, supplier details, pricing, product policies, product launch schedules, business plans, and so on." Trade secrets have been defined by various theories, but no one acceptable definition has been proposed. However, the fact that trade secrets are still the driving force behind business in the world proves that looking at many of the world's most profitable businesses based on basic trade secrets. Examples include Coca Cola secret formula, Macdonald's special sauce, Google search algorithm, Bumble’s dating software, New York Times best seller list, Hyderabad fish cure asthma, Krispy Kreme doughnut recipe.
3.Why do we need a law to protect trade secrets?
With the spread of globalization, the advancement of technology is at a high level. Therefore, technology and information are intertwined in information exchange and copying information. Therefore, issues related to the protection of confidential information have been created. Attempts are being made in various ways to access even the trade secrets that drive a business, and this is at great risk through illegal access. Therefore, action must be taken to prevent illegal access to trade secrets based on advanced technology.
Sometimes a trade secret is based on a trusting relationship between the employer and the employee. But due to the prevalence of competitive job opportunities in modern society, job transfers also occur frequently. So the chances of trade secrets going out are high. This must therefore be remedied by a combination of labor law and business law.
Under business law, fair competition is always encouraged and action is taken against unfair competition. As long as trade secrets are protected, there is no room for unfair competition. For example, when trade secrets are protected, the consumer is protected because the highest quality goods fall into the hands of the consumer. But the illegal disclosure of a trade secret has the potential to bring similar products to market at a lower price, under a different label, which affects not only the survival of the business but many other factors as well.
As a result of trade secrecy protection, companies and businesses are increasingly investing in research and development, which has made a huge contribution to a state economically. It is also an opportunity to develop innovation and new knowledge. Israel, for example, discusses trade secrets to the fullest and allows for innovation. As a result, it has been able to achieve high growth in all sectors. The specialty here is that it contributes to the growth not only of large companies in Israel but also of SMEs.
A trade secret lasts indefinitely. A patent, for example, lasts only twenty years. So if a trade secret can be protected and allowed by law, then a company can create as much sustainability in the business world as it can keep a trade secret. This is also due to the way trade secrets are managed, and if the existing law is strong and comprehensive, each company and business will be able to manipulate it as they see fit. Coca-Cola, for example, is now one of the top business names in the world and has kept its trade secret for over a hundred years. In particular, various methods have been used to protect the secret, and Coca-Cola ceased production in India after the 1977 Indian Foreign Regulations Act revealed Coca-Cola's formula and suggested that it should deal with another company. 17 years later, they have started production in India. Accordingly, if in some way a state does not provide the necessary facilities to protect the trade secret of a multinational company or investment or other local business, there is even a risk that the business will leave the country. Protecting trade secrets is a way to help the business world thrive.
4.Indian Legal Status Regarding Trade Secrets
The statutory status of trade secrecy protection in India is silent. But the legal status of trade secrets is covered by contract law, copyright law, principle of equity and common law. As a signatory to the Trade Related Aspect of Intellectual Property Rights, it is committed to protecting undisclosed information. It is therefore clear that India also has an obligation to protect trade secrets under international law. But there has been more growth involving intellectual property law than business law. However, it can be argued that the protection of rights under intellectual property law ultimately applies to business law as well.
Therefore, some commentators have argued that Indian courts may recognize trade secrets as a right to justice rather than an absolute property right. But certain statutory provisions of Indian law contain trade secrets in various ways.
Section 27 of Indian Contract Act: It prevents any person from disclosing the information he or she receives as a result of the agreement.
Section 72 of the Information Technology Act
Section 43A of the Information Technology Act
Copy Right (Amendment) Act (2012)
The court should also look into how the legal status of trade secrets has developed through litigation law. The principles put forward in the Saltman Engineering Co. Ltd vs Campbell Engineering Co. Ltd judgment are specifically followed by Indian courts. One party becomes ill-gotten rich by illegally obtaining trade secrets. This is recognized by law as an unjust enrichment. John Richard Brady and Others vs Chemical Process Equipment (Pvt) Ltd (AIR 1987 Delhi 372) is a case in point.
The American Express Bank vs. Priya Puri (2006) case also highlights the extent to which trade secrecy law affects economic interests. That is, "unfairly affecting economic interests through the unfair dissemination of information, such as formulas, technical knowledge, or business practices followed by the employer without further notice." A unique opportunity can also be found here in discussions that go beyond Indian litigation. In 2006, three people were arrested and even jailed for revealing a trade secret belonging to Coca-Cola to rival PepsiCo. Following this incident, Coca-Cola CEO Neville Isdel stated:
“While this breach of trust is difficult for all of us to accept, it underscores the responsibility we each have to be vigilant in protecting our trade secrets. Information is the lifeblood of the company.”
The views expressed in the case of Zee Telefilms Ltd vs Sundial Communication (2003 BomC R404) are important in discussing possible remedies for trade secrets under Indian law. In this case, compensation alone would not be sufficient if the victim had acted in violation of trade secrets. An injunction may also be obtained against the breach of the relevant confidentiality.
But the need for a constitutional intervention to protect trade secrets in India was raised in 2008 and efforts were also made to protect trade secrets through the National Innovation Bill. It even discusses how to interpret confidential information. In 2016, attention was also drawn to the Trade Secrets Act, which was discussed as a result of a discussion between the Indian Minister of Commerce and the United States Representative on Trade Secrets Law. But the intellectual property policy was adopted in 2016, and the extent to which the protection of trade secrets is addressed in it is questionable. That is, even in that effort, an adequate constitutional law was not established. It has therefore been argued that the time has come to develop legislation on the protection of trade secrets in India.
5.The Status of International Law on Trade Secrets.
Domestic law may contain laws that are required to protect trade secrets in some way or maybe not. In such a case, the assistance of international law can be enforced to enforce the rights to trade secrets created at great expense. In general, there are two major legal instruments in international law that study trade secrets. The first is Article 39 of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). In particular, this Convention, which is governed by the World Trade Organization, applies primarily to intellectual property law. But this article discusses three basic features that are required to establish a trade secret. Those situations are discussed at the beginning of this article.
In addition to this major international legal status, Article 10bis of the Convention for the Protection of Industrial Property (Paris Convention) also provides for this. Accordingly, it provides effective protection for the member state against the damage caused by unfair competition. But trade secrets are not discussed beyond honest usage. Accordingly, these issues can be more or less applied to the domestic law, thereby improving the business environment.
The judiciary seeks to develop a law on trade secrets under various circumstances, but the need for an acceptable statutory law has already arisen. Especially then even the interpretive role can be properly performed. This will create a safer business environment as there will be stronger provisions in domestic law and international legal sources can be used to fill in the gaps if they exist. It is also a reason to encourage investors. But in many parts of the world, trade secret law is also discussed on issues related to intellectual property law. But a trade secret is different when compared to an intellectual property like a patent. Therefore, it is more progressive to focus on this under business law.
You can go to court to get relief when you break the law regarding a trade secret. But it's still a trade secret. That is, if that secret is revealed, it is no longer a secret. It is also a more complicated matter how to deal with a trade secret, as it should be done in such a way that it is kept as secret as possible. That is, it is questionable in practical use. Therefore, it is time for each state to consider developing trade law on trade secrets from a new perspective. It should be an effective law rather than just a law. This is because trade secrets can be cited as a key factor in determining the future of a state. However, it is the responsibility of lawmakers to strengthen existing laws as well as to create new laws that address modern conditions. It is also the responsibility of the judiciary to interpret those laws in the commercial world. Protecting trade secrets is also an invaluable strength in many areas of business, commerce, finance, and investment as a whole.
Faculty of Law, University of Colombo, Sri Lanka