BUSINESS LAWS AND ITS CONFLICT WITH TRADE SECRETS
Business Laws and its conflict with Trade Secrets
Meta Description – Business laws governs the corporate sector, manufacturing sector and retail sector. It includes various kinds of law like contract law, manufacturing laws etc. it refers to and pertains to the legal laws of business and commerce in the public as well as the private sector. It safeguards the working spaces for all individuals involved in the business and business ethics. Trade secrets are a type of intellectual property that includes formulas, practices, processes, designs, patterns or compilations of information that have inherent economic value because they are not generally known or readily ascertainable by others, and which the owner takes reasonable measures to keep secret.[1]
Major issue comes when the question of the employees of the company are to be considered in order to protect the trade secret. Many litigation have evolved due to Section 27 of Indian Contract Act which makes the restrain of doing business void. The judicial intervention somehow gives any idea on how to protect the concept of trade secret when there is no explicit registration or protection of it. With more advancement in the competition, the need to protect trade secret has become necessary.
INTRODUCTION
Every person has rights of their own and it is obvious that everyone wants to enjoy their rights to the fullest. It is but natural that one’s rights might affect another person’s rights. The set of rules or principles enforced by the sovereign authority of the land to control and regulate the mutual dealings is known as ‘Law’.
Each day our World is developing and we come into some kind of contact in our daily life. For example, from buying groceries from shop to working in an office, we come into a contract indirectly and directly. So, that is why we need Business Laws. The main aim of putting Business and Law together is to maintain safe and functional work spaces for all individuals involved in the business whether employer or employee, consumer or seller, parties, etc.
If we talk about Business Laws in India these are the main laws provided since a long time ago:
INDIAN CONTRACT ACT, 1872
Law of Contract is the most important branch of the Business law. In India, such law is provided under the Indian Contract Act, 1872 which came into force on September 1, 1872.
Contracts are agreements enforceable by law. All contracts are agreements but all agreements are not contracts.
Validity of contracts are classified into mainly 2 groups:
- Void Contracts
- Valid Contracts
When all the essentials of a contracts are fulfilled i.e., an agreement enforceable by law then such agreements are known as Valid Contract.
When an agreement which is not enforceable by law by either of the parties is Void Ab Initio (from the very beginning). As per Section 2(g) of the Indian Contract Act, 1872.
When an agreement was initially legally enforceable but which has become void due to supervening impossibility of performance then such agreements will become Void Contracts.
AGREEMENT IN RESRAINT OF TRADE
Section 27 of the Contract Act says an agreement seeking to restrain a person from exercising a lawful profession, trade or business of any kind is void to the extent. Public policy requires that every person should be at liberty to work for himself and should not be at liberty to deprive of himself or the state of his labour, skill or talent by any contract that enters into.
INTELLECTUAL PROPERTY DEFINITION AND LAW
[2]They are intangible properties i.e., involves application of human mind taking place or any idea or expression which comes into existence.
IPR are protected under TRIPS Agreement. TRIPS, also known as Trade Related Aspects of Intellectual Property, was signed in 1995 by WIPO (World Intellectual Property Organization) and WTO (World Trade Organization).
Infringement of IPR affects the reputation, identity and goodwill of the rights holder and in order to ensure that no person rights shall be infringed, TRIPS was made legally binding among the member states of the WTO so that every individual rights can be protected worldwide.
CONCEPT OF TRADE SECRET
[3]A trade secret is any data or knowledge that applies to companies that is not commonly available to the general public, as well as fair measures to keep such information confidential. “A trade secret is any knowledge of commercial value that is not in the public domain and for which fair measures have been taken to protect its secrecy,” according to the North American Free Trade Agreement (NAFTA). A trade secret, according to the court in Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibberis information that would cause actual or substantial harm to the owner if exposed to a competitor. It may contain formulae not only for product manufacture but also, in some cases, the names of consumers and the products they purchase.
There are three conditions that must be considered according to Article 39.2 of the Trade-Related Aspects of Intellectual Property Rights (TRIPS):
(a)The information is not widely known by or readily available to individuals who usually deal with the type of information in question, either as a whole or in the particular configuration and assembly of its components;
(b)The information has real or potential commercial value because it is secret;
(c)The person legally in charge of the information has taken appropriate measures under the circumstances.
Trade secrets include financial statements, client lists, and customer information, as well as company strategies and policies. Customer information, on the other hand, was not considered trade secret or property in India. According to the assumption that the goal of confidentiality is usefulness, a trade secret must be utilitarian in nature.
Trade secrets are sensitive information’s intellectual property (IP) rights that can be sold or authorized.
In general, for knowledge to qualify as a trade secret, it must be:
- Commercially important because it is classified, accessible only to a small number of people, and
- subject to fair efforts by the legitimate owner of the information to keep it secret, such
- as the use of confidentiality agreements with business associates and employees.
Unauthorized possession, use, or distribution of such classified information by others in a manner that is inconsistent with honest business practices is considered an unfair practice and a breach of trade secret rights.
TRADE SECRET AND INDIAN LAWS
There is no particular law safeguarding trade secrets. India faces a dearth of effective legislation guarding confidential information between companies. India needs strong laws for protection of trade secrets. Due to the TRIPS Agreement on IPR, many of the member nations have updated their legislation according to the situation. It is high time India needs to bring laws for the protection of trade secrets otherwise it will be very difficult for the country to become the Global Market Leader.
LANDMARK JUDGMENTS:
In Daljeet Titus, Advocate v. M Alfred A Adebare and Ors[4]., the Delhi High Court observed that the Courts must act to prevent a breach of trust that is not caused by another party. Subsequently, the High Court issued an order prohibiting the Defendant therein from using the Plaintiff’s information that they had access to, in violation of confidentiality. The Defendant, who worked with the Plaintiff was forbidden from using the agreements, due diligence reports, consumer contact lists, and other personal information that the Defendant obtained as a result of their engagements.
In the absence of legislation, Indian Courts and Tribunals have made it very apparent that they will safeguard trade secrets through common law for the benefit of Indian companies.
In John Richard Brady and Ors v. Chemical Process Equipment P Ltd and Anr,[5] the Delhi High Court observed that it would be in the interest of justice to prevent the Defendants from abusing the know-how, specifications, and technical information about the Plaintiff’s organization, endowed to them pursuant to the express condition of strict confidentiality.
In the case of Bombay Dyeing & Manufacturing Co Ltd v. Mehar Karan Singh,[6] the Bombay High Court established specific safeguards to be taken by the holder of trade secrets as one of the grounds for the knowledge to be regarded as a trade secret.
The High Court further observed that the thumb rule is that organisations must employ confidentiality measures that are obvious to onlookers so that they consider it as such. If the possessor of a trade secret freely reveals the secret, the secret loses its trade secret status by definition. Owners of trade secret on the other hand, may avoid it by strategically employing contract law.
By executing a widely drafted non-disclosure agreement and giving plenty of leeway for different interpretations, the trade secret owner may be able to avoid the precautionary action while still freely sharing knowledge.
CONCLUSION
In India, amid the other IPs, trade secrets protection is not covered under any statutory position, and trade secrets are considered to be one of the most isolated regimes from a legal perspective. The present law system which in some manner seeks to provide interim protection to those possessing technical know-how (or) information is subjected to several flaws and shortcomings. There exists no consent (or) consistency among the present laws, and when the cause of action is a breach of confidence, there are only civil (or) equitable remedies available. The law on this issue is still at an emerging stage and there are several concepts that have not been introduced yet to the present law.[7]
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[1] Lin, Thomas C.W. (8 October 2013). “Executive Trade Secrets”. Notre Dame Law Review. 87 (3): 911. SSRN 2047462. Retrieved 20 February 2020.
[2] . www.wipo.int
[3] ibid
[4] Daljeet Titus, Advocate v. M Alfred A Adebare and Ors., 130 (2006) DLT 330
[5] John Richard Brady and Ors v. Chemical Process Equipment P Ltd and Anr, AIR 1987 Delhi 372
[6] Bombay Dyeing & Manufacturing Co Ltd v. Mehar Karan Singh, Notice of Motion No.4248 of 2008 In Suit No.3313 of 2008
[7] Dejurenexus, https://dejurenexus.com/protection-of-trade-secrets-in-light-of-business-laws-how-can-the-existing-conflict-be-eased/, Last visited 4th April, 2023