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INTRODUCTION TO TRADE SECRET

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In today’s world almost every person knows what intellectual property is and protection of
intellectual property has become a matter of paramount importance for every person involved
with intellectual property. Patents, trademarks and copyrights have been the most popular
forms of intellectual property till now but there are more forms of intellectual property which
are gaining importance in the past few decades, designs and geographical indications being the
most popular of them. A still new form of intellectual property which has gained recognition
in the past two decades is Trade secrets and it is this form of IP with which we are concerned
here.

What is a trade secret?

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”.

The Trade Related Aspects of Intellectual Property Rights (TRIPS) lays down three essential
conditions which are to be fulfilled by any information before it can be considered undisclosed
information (trade secret), they are:-

· Such information must be secret, i.e., not generally known or readily accessible to "persons
within the circles that normally deal with the kinds of information in question."

· the information must have commercial value because it is secret and,

· the information must be the subject of reasonable steps by its owners to keep it secret.

The Uniform Trades Secrets Act, 1970 also provides for the definition of trade secrets, which
is as follows:-
“Information, including a formula, pattern, compilation, program device, method, technique,
or process, that: (i) derives independent economic value, actual or potential, from no being
generally known to, and not being readily ascertainable by proper means by, other persons who

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Introduction to Trade Secret ,extracted from http://www.legalserviceindia.com/article/l123-Trade-
Secrets.html (Visited on 21st September ,2018)
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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”.

After reviewing all the above definitions, we can say that 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.

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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.

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Significance to Trade Secret extracted from http://www.legalserviceindia.com/article/l123-Trade-
Secrets.html (Visited on 21st September ,2018)
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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.

In any developing country, protection of intellectual property is one of the most significant
tasks, as it encourages foreign investment in many fields. India does not have any proper laws
for protection of Trade Secrets, we still depend on the old traditional Common Law Principles
for Protection of Trade Secrets; these Common Law Principles have lost their significance in
the scenario of the developing Economy. There is a dire need for a Proper Policy Frame work
to regulate Protection of Trade Secrets. There are a lot of Companies, especially chemical
companies who prefer Trade Secrets as a form of protection for their Intellectual property;
these companies are reluctant to invest in India just because India cannot offer proper
protection for their Trade Secrets. India is losing on a lot of Foreign Direct Investment because
of this.

Trade Secrets: Their position and protection in India

Position of Trade Secrets in India :

Trade Secrets seems to be a neglected field in India, as there is no enactment or policy

framework for the protection of trade secrets. This form of intellectual property is a new entrant
in India, but is nevertheless a very important field of IP. Protection of trade secrets is a very
important and one of the most challenging tasks for the Indian government as this will enhance
the foreign investment in India giving a boost to the Indian economy. Foreign investors have
to be assured of the protection of their trade secrets, so that they can do business with our
country. A proper policy for trade secret protection will further enhance the security in our own
industry. Almost all the countries in the world have a policy for the protection of trade secrets
and India also being a signatory to the TRIPS is under an obligation to amend its laws or create
a new law in order to safeguard the trade secrets of various businesses. So a proper policy for
the protection of trade secrets in India is the need of the hour in order to provide a sense of
security among the foreign investors and the local businessmen regarding their trade secrets
which will further boost the Indian economy.
As mentioned above, in India, no substantive authoritative text or case laws are available to
determine the nature or ambit of trade secrets. But the Indian courts have tried putting the trade
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secrets of various businesses under the purview of various other legislations in order to protect
them and also they have tried to define what a trade secret is in various cases, some of them
are as follows:-

1. 3American Express Bank Ltd. v. Ms. Priya Puri - Delhi High Court, in this case defined
trade secrets as “… formulae, technical know-how or a peculiar mode or method of business
adopted by an employer which is unknown to others.”

2.4 Michael Heath Nathan Johnson v. Subhash Chandra And Ors and John Richard
Brady And Ors v. Chemical Process Equipments P. Ltd. And Anr -took note of the
contentions of the counsels who referred to English decisions to define trade secrets.

3.5 Mr. Anil Gupta and Anr. v. Mr. Kunal Dasgupta and Ors the Delhi High Court held
that the concept developed and evolved by the plaintiff is the result of the work done by the
plaintiff upon material which may be available for the use of any body, but what makes it
confidential is the fact that the plaintiff has used his brain and thus produced a result in the
shape of a concept.

The legislations which are having a connection with the trade secrets can be summed up as
1. Copyright Act, 1957[Section 51,55 and 63]
2. The Designs Act,2000
3. The Information Technology Act, 2000[Section 65, 72]
4. Indian Penal Code [Section 408, 415]
5. The Indian Contract Act [Section 27]
6. The Competition Act, 2002 [Section 3]
7. Civil Procedure Code
8. Criminal Procedure Code

Below mentioned are the various cases in which an attempt has been made to protect the trade
secrets under the heads of their respective legislations:-

3
(2006)III LLJ 540(Del)
4
60(1995) DLT 757
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97 (2002) DLT 257; what makes it confidential is the fact that the plaintiff has used his brain and thus
produced a result in the shape of a concept.
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Copyright Act, 1957

A. Burlington Home Shopping Pvt. Ltd. Vs Rajnish Chibber6
The main issue in this case was whether a database consisting of compilation of mailing
addresses of customers could be subject matter of a copyright and whether the defendant can
be said to have committed infringement of the plaintiff's copyright? The court held “a database
consisting of compilation of mailing addresses of customers can be subject matter of a
copyright and if used by the defendant will amount to an infringement”

B. Mr. Diljeet Titus Vs Mr. Alfred A. Adebare and Ors7

In this case the issue was whether compilation of list of clients and their addresses amounts to
a 'literary work' wherein the author has a copyright? The Court came to the conclusion that list
of clients and their addresses amounts to a literary work, which falls under the purview of the
copyright act.

C. Mr. Anil Gupta and Anr. Vs. Mr. Kunal Dasgupta and Ors8
There were two main issues before the court in this case. First was, Can there be a copyright in
an idea, subject matter, themes, and plots based on historical characters and the second was,
Where the theme is the same but is presented and treated differently so that the subsequent
work becomes a completely new work, does a question of violation of copyright arises. The
court held “concept developed and evolved by the plaintiff is the result of the work done by
the plaintiff upon material which may be available for the use of anybody but what makes it
confidential is the fact that the plaintiff has used his brain and thus produced a result in the
shape of a concept”. And therefore the plaintiff can claim copyright over it.

Designs Act, 2000

A. Tractors and Farm Equipment Ltd. Vs. Green Field Farm Equipments Pvt. Ltd. and
9
Ors.
The picture that emerges from the above case law is that the court shall entertain injunction only if the
same is protected either through Copyright or Designs along with a non-disclosure agreement.

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61(1995) DLT6
7
2006(32)PTC609
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97 (2002) DLT 257
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2006(32)PTC343(MAD)
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Attracting Criminal Liability

A. Pramod s\o Laxmikant Sisamkar and Uday Narayanrao Kirpekar Vs Garware

Plastics and Polyester Ltd. and Anr.10
The Respondent contending that the action of the petitioner’s amounts to Criminal Breach of
Trust and cheating as the technical know-how acquired by the respondents amounts to
‘property’, filed a criminal complaints. Court did not answer the question of whether a trade
secret amounts to being a property,

because the case hadn’t satisfied the other requirements for attracting criminal liability. The
plaintiffs failed to prove the dishonest intention on the part of the appellants. The court evades
in deciding as to whether it would amount to ‘property’. But, the court had made an observation
that if the petitioners use the technical knows how in contravention of the agreement of service,
then section 408 and 420 can be attracted.

But as the burden of proof in criminal cases is much higher in criminal cases, its scope is
minimized.
Contractual Liability (Section 27 of the Contract Act)

A. Pepsi Foods Ltd. and Others Vs. Bharat Coca-Cola Holdings Pvt. Ltd. & others11
Relief sought here was an injunction restraining the defendant during the continuance of the
agreement of employment and the same was not granted.The court held that the agreement was
in restrain of trade. The Court also held that the freedom to seek employment cannot be
curtailed and no injunction to such an effect can be granted.

B. Ambiance India Pvt. Ltd. Vs. Shri Naveen Jain12

The relief sought here was an order of ad interim injunction till disposal of the suit and the
same was not granted. The Court was of prima facie view that the Agreement between the
parties prohibiting the defendant for two years from taking employment with any present, past
or prospective customer of the plaintiff is void and hit by Section 27 of the Indian Contract

10
1986 (3) Bom.C R411
11
81(1999)DLT122
12
122(2005) DLT421
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Act. This stipulation was prima facie against public policy of India and an arm-twisting tactic
adopted by an employer hence relief sought for an order of ad interim injunction till disposal
of the suit and the same was not granted on these grounds.

CONCLUSION

From the cases discussed we can clearly see that in India trade secrets have been protected
using common law principles like equity and fraud. In most cases of these they have been
refereed under Section 27 of the Indian Contract Act. Relief claimed in these cases, are
enforcement of Non-Disclosure Agreements between the employee and the employer. The
courts have been very reluctant to enforce covenants, which put post employment restrains on
the employee. The courts have seen these cases as a clash of two interests, the right to livelihood
of the employee and right to make profit of the employer.

So it is quite clear from these cases that the courts have try to protect the interest of the
employees rather than the employer and in all these cases the court has taken a different stand
in the circumstance of the respective case there is no uniform rule. This is where the problem
starts when there is no uniform rule you cannot be sure of in which direction the court may lean
on, this apprehension discourages development of ideas and Investment by companies in areas
where they can protect their Intellectual Property through investment but if we have policy like
a legislation this will give a uniformity for protection of Trade Secrets then the courts will have
to be bound by the legislation.

Although realizing the need of legislation for the protection of trade secrets, the Indian
legislature came up with a bill named as “The Personal Data Protection Bill” which was
introduced in Rajya Sabha on 8th December, 2006, but unfortunately the bill has not been
passed till now and is pending the approval of the Indian Parliament before it can become an
act.
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INTRODUCTION TO TECHNOLOGY TRANSFER

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Technology Transfer (also called Transfer of Technology (TOT) and Technology
Commercialization)1 are the processes by which the information or knowledge related to the
technological aspects travel within the group or between the organizations or entity. Taking
this to the broader scenario, give rise to International technology transfer in which the
knowledge travels in between the countries, which is not only limited to the Knowledge and
information, rather includes skill transferring, methods of manufacturing, physical assets,
know-how, and other technical aspects, and henceforth helps in further development of the
technology and innovation, by effectively utilizing the technology transferred and finally
incorporating it.

Technology transfer has been used in the movements of technology from the laboratory to
industry or from one application to another domain application or taking developing countries
into consideration technology transfer helps in growing access to technologies which are
related to other developed countries and henceforth helps in approaching towards the newer
technologies and inventions i.e. from Developed to developing countries.

On the other hand licensing is allowance granted by the patent owner to another person or
organization for using the patented invention on agreed terms and conditions, while the patent
owner continues maintaining his ownership to the patent and hereafter becomes the source of
income by receiving the predetermined royalties or as per the condition.

So by combining the concept of the technology transfer with the licensing one can help in
taking the benefit of the technology research that has been done previously, as licensing creates
the permissible structure for the transfer of the technology to a larger assembly of researchers
and engineers, which will help in saving the expenses of conducting the research and the costs
of maintaining development activities or facilities and hence will help in the further
development of the technology which has already been done.

As now a days in the era of the advancement in the technologies there are many technologies
which with the combination with the other technologies is giving birth to the other new advent
technologies. so here the licensing do play the important role in providing the legal platform to

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Introduction to Technology Transfer in India , extracted from http://en.wikipedia.org/wiki/Technology_transfer
(Visited on 20.09.18)
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utilize the combination of the technologies made or discovered by the other persons or the
organization which has been created earlier, and hereafter prevents from wastage of the time
and the research cost incurred in developing the earlier inventions.

SIGNIFICANCE

Exponential Growth of Technology in India has played a significant role in all round
development and growth of economy in our country . Technology can either be developed
through own research and development or it can be purchased through indigenous or imported
sources. India has opted for a judicious mix of indigenous and imported technology. Purchase
of technology is commonly called “Technology transfer” and it is generally covered by a
technology transfer agreement.14
‘Technology transfer’ means the use of knowledge and when we talk about transfer of the
technology, we really mean the transfer of knowledge by way of an agreement between the
states or companies. ‘Transfer’ does not mean the movement or delivery; transfer can only
happen if technology is used. So, it is application of technology and considered as process by
which technology developed for one purpose is used either in different applications or by a
new user.

FORMS OF TECHNOLOGY TRANSFER:

Technology transfer can be classified into vertical and horizontal technology transfer2

Vertical transfer refers to transfer of technology where transmission of new technologies is

done from the generation of new technology during the research and development programs
into the science and technology organizations, for instance, to the application related to the
industrial and agricultural sectors, or we can say that vertical transfer is the technology transfer
commencing from basic research to applied research, from applied research to development
followed by development to production.

While the horizontal technology transfer is the movement of a well-known technology from
one equipped environment to another (from one company to another) or say refers to the

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Significance of Technology Transfer in India ,extracted from http://www.sethassociates.com/technology-
transfer-agreements-in-india.html (Visited on 20.09.18)
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transfer and use of technology used in one place or organization to another place or
organization.

INDIAN SCENARIO REGARDING THE TECHNOLOGY TRANSFER15

Technology in India is growing exponentially and has played an important role in all round
development and growth of economy in the country, India has opted for a wise mix of original
and imported technology. Henceforth "Technology transfer" plays a very important role and is
generally covered by a technology transfer agreement.

Developing countries like India generally not follow the usual path for development with
regard to technologies but use their advantage in the cutting edge technology options which is
now available and put the tools to use this modern technology.

Technology transfer is assumed to get benefits from R&D which is shared with the developing
and underdeveloped countries , so taking this to the point of consideration National research
laboratories is been constructed by the Indian government for the purpose of R&D which is yet
to be commenced by the private sectors.

India generally comprises of small and medium enterprises and is growing since liberalization,
which has resulted in growth of the multinational enterprises, which in turn is competing with
the international companies which has enhanced the confidence of India. Not only confined to
the pharmaceuticals but is broadly categorized in other areas too such as agriculture, dairy and
other technologies.

Government of India is in the verge to open Technology Transfer Offices, Universities,

institutions which will be funded by central government and will acts as mechanism for
transferring or exporting the research conducted and its outcome to the desired place.

Though some of the Indian Institutes have been already commercializing their research and are
successful in technology transfer in which they have been licensed as technologies to industry.

15
Indian Scenario regarding Transfer of Technology ,extracted from
http://www.mondaq.com/india/x/346256/Licensing+Syndication/Licensing+And+Technology+Transfer+A+Gla
nce+On+Indian+Scenario (Visited on 23rd September ,2018 )
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Moreover, numerous cases of technology transfer are seen in India by various well-known
institutions.

ADVANTAGES RELATED TO TECHNOLOGY TRANSFER:

The advantages related to technology transfer comprises of the essential gain to the public who
benefits from the manufactured goods that get to the market and ultimately the availability of
the jobs which results from the improvement and sale of the products so formed. And hence it
encourages use of technology developed and the benefiting to the society development which
comes from the revenue of the tax payers. And escalating visibility to researchers and allows
researcher to generate and earn royalty income and henceforth attaining financial profits for
the government and the employees from royalty payments for those technology transfers that
involve patent licenses.

Moreover resulting in commercialization of the researches and the discoveries made, which
was the course of the investment done for the development and being protected by the patent.
Hereafter all the investments done in the course of the development in intellectual property are
returned to the public through products made for the public, opportunity of more employment,
and revenue in the form of taxes.

Technology transfer strengthens industry by identifying new business opportunities which

contributes to enhancing the know-how and competitiveness of the technology providers,
which ultimately results in broadening the business area and re-focusing to the technologies
and systems to serve several different fields. In addition, technology transfer promotes the
wider use and awareness of technology and systems.

Technology transfer brings economic benefits by increasing revenues for both technology
donors and receiver's benefits with new and better products, processes, and services that lead
to increased efficiency and effectiveness, greater market share and increased profits.

Moreover technology transfer helps in earning rewards which is above and beyond the regular
salary which is received through patents, licenses, and other technology transfer awards which
help in benefiting intellectually and professionally through working collaboratively with their
peers in the industrial sector.
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DISADVANTAGES RELATED TO TECHNOLOGY TRANSFER

As technology transfer is keen or meant for the business oriented activity, hence forth there can
be the chances to have financial or commercial risk, as we are well aware that Licences can
generate the income, but patent application which are not licensed will only cost money.

Even when the transfer programme related to the technology transfer is successful or in
particular after technology transfer institutional tensions may arise within the organization
which may be in between the recipient of licensing income and those who know they will never
make utilizable inventions. For the sake of remedy in those circumstances Institutional policies
can be made aiming to have partial rearrangement of income received by license between all
research groups but, using this strategy may not eradicate the problem rather in most of the
cases discoverer will be frustrated or disappointed because the income that they have earned is
given to other groups. Technology transfer activities may put researchers in conflict of interest
situations, especially when the transfer involves the creation of the spin- off company, hence
Institutions should be aware of these possible dangers.

Moreover problem can be because of non performance of licensee. And may be the licensee
has limited chances beyond the license scope unless future enhancements to patent included in
initial agreement and Unrealistic expectations and demands from licensor.
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CONCLUSION

Technology transfer and its licensing have played a crucial role in all round development and
the advent of the technology which in results help in the development of the economy of the
country. Hence forth helps in creating the wealth to the country.

India as a developing country need to work on the technology development and technology
transfer and needs to make a building strategy comprising of the construction of new offices
related to technology transfer and to make youngsters aware to the benefits related to the
technology transfer, by establishing the specified universities and henceforth increasing the
pace of the technology transfer and technical research and development in technical
perspective.

Finally as discussed we can conclude that there is the possible advantage and disadvantage of
the technology transfer. But we have to see this in the broader aspect so that our country as
well as the citizen of our country should be benefitted.

Therefore ,both Trade Secret and Technology Transfer comes under the broad perspective of
Intellectual Property Laws which has different implications in the current global commercial
scenario and has wide scope of development internationally as well as nationally.
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