By- Disha Bohra, UG Law Student, United World School of Law, Karnavati University
•Abstract
Intellectual property laws are still evolving and not fully recognized; some categories have yet to gain broad acceptance or protection as part of intellectual property. Trade Secrets are one such category that falls outside the scope of Intellectual Property protection and is instead secured by domestic contractual and civil laws in various countries. Trade secrets, which are considered the norm in trade practices, involve traders or their employees using specific information to gain a competitive advantage. This confidential information includes formulas for product development, business practices, unique processes, consumer-friendly designs, and tools for achieving goals, trade patterns, and compiled data that provides a commercial benefit over competitors.
Referred to as 'know-how,' this information represents distinct abilities or skills acquired through intellectual endeavours and is kept secret to maintain an economic advantage in the related industry. Trade secrets are formulas, patterns, devices, and compiled information used in the course of business and commerce. Trade Secrets must be kept secret because their inherent confidentiality and exclusivity would reduce their value and utility if they were made public. Confidential information is typically kept at the industry level or among business owners because its dissemination risks and compromising not only the identity but also the inherent value it can bring to the enterprise.
Business owners must put in place a strong mechanism to prevent the public disclosure of confidential information. These secrets are like a genie in a bottle, and once released, they can reach anyone, making them ineffective. The inherent need for confidentiality is an important feature of trade secrets. Owners and individuals in hold of such secrets must take proactive measures to protect them. This includes drafting agreements and imposing strict rules on those who have access to confidential information, as well as arrangements to protect the privacy of carrying out methods, preventing inadvertent disclosure.
Trade secrets, broadly defined as any confidential information of commercial value, refer to information that is commercially important but is kept confidential within the business realm. The term itself implies its meaning; trade refers to business or commerce, whereas secret refers to something hidden or confidential. These secrets become valuable when they provide potential commercial benefits to the associated industry. Given their unknown nature, the owners bear the primary responsibility for maintaining secrecy and confidentiality. Owners must protect all business data, lists, compilations, or techniques from disclosure to competitors or others with a stake in the business. In cases where owners have taken adequate steps but secrets are lost due to fraudulent intent or negligence, legal action is required to ensure justice for the affected parties.
Indian laws currently lack specific legislation protecting trade secrets. Instead, the governance of trade secrets is based on Non-Disclosure Agreements between employers and employees, as outlined in ‘Section 27 of the Indian Contract Act (1872)’. Unfortunately, the effectiveness of these agreements is undermined by employees, resulting in the unauthorized use of confidential information. There is an urgent need to formally recognize trade secrets as a distinct type of intellectual property and establish safeguards through dedicated legislation. Such recognition would be consistent with the provisions of the TRIPS agreement, putting the country on par with developed nations. Implementing a strong mechanism to protect trade secrets can undoubtedly help businesses grow and boost the country's economy.
INTERNATIONAL REGULATORY FRAMEWORK
The Paris Convention and Trade secret
Global discussions about trade secrets date back to the establishment of the Paris Convention in 1883, which is overseen by the World Intellectual Property Organization. Trade secrets were initially considered part of industrial property laws aimed at tackling unfair competition, but were later recognized as undisclosed or confidential information within the realm of intellectual property. This recognition was formalized in 1995 with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), an international pact encouraged by the World Trade Organization (WTO) member countries, defined trade secrets as 'Undisclosed Information' that could be misappropriated through dishonest practices, resulting in unfair competition.
The Paris Convention does not clearly define or mention trade secrets. Instead, the inference can be drawn from ‘Article 10bis’, which prohibits unfair competition. This article encourages member countries to establish effective mechanisms for regulating unfair competition within their respective jurisdictions. Building on this provision, the TRIPS Agreement, under Section 7 Part II of Article 39 requires its member countries to protect undisclosed information within their respective legal frameworks.
The Paris Convention on Industrial Property, which dates back to 1883, is regarded as one of the first multilateral treaties to have a significant impact on modern intellectual property laws. Despite the lack of a direct definition or disclosure of Trade Secrets, the convention emphasizes the importance of their protection by regulating dishonest commercial practices, which are considered unfair competition. Article 1 of the Paris Convention defines 'Industrial Property,' which includes, among other things, 'the suppression of unfair competition.' This implies that any action that prevents fair competition, when associated with Intellectual Property, includes Trade Secrets within the scope of Industrial Property. Misappropriation of trade secrets, as a dishonest commercial practice that causes unfair competition, requires protection through appropriate mechanisms, as intended by Article 1 of the Paris Convention. Furthermore, Articles 10bis and 10ter of the convention emphasize the importance of preventing unfair competition.
‘Article 10bis’ need Union countries to establish effective domestic mechanisms to protect against unfair competition. It specifically prohibits dishonest acts in industry or commerce that result in unfair competition, such as actions that confuse consumers about products, competitors businesses, or false allegations intended to harm a competitor's reputation. The Paris Convention implicitly addresses trade secrets by focusing on ensuring competition within its Union Countries in order to promote and protect industrial property. Despite not explicitly mentioning trade secrets, the convention's provisions, particularly ‘Article 10bis’, address any misappropriation or misuse that could lead to confusion about products, sources, or competitors.
‘Article 10ter’ of the Paris Convention expands protection on an international scale, urging Union countries to develop legal remedies for nationals of other Union countries within their own territorial frameworks. This global protection authorization ensures that trade secrets are protected not only domestically but also across national borders. Article 10bis of the Paris Convention, considered a foundational provision on trade secrets, used as a reference point when protecting trade secrets under the TRIPS Agreement. The principles outlined in the Paris Convention governing trade secrets are regarded as fundamental concepts that have developed over time. Despite the lack of specific reference to trade secret protection, signatory countries are required to provide protection against unfair competition, demonstrating a commitment to protecting trade secrets.
The TRIPS Agreement on Trade Secret
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) needs World Trade Organization (WTO) member countries to protect trade secrets domestically in the same way that they protect other types of intellectual property. This commitment, made in 1995, was pivotal in the evolution of Trade Secret laws. In contrast to the Paris Convention, which addressed dishonest trade practices and the regulation of unfair competition, the TRIPS Agreement provided an expanded and explicit framework by recommending the protection of Undisclosed Information under Article 39, Section 7 of Part II.
Under the TRIPS Agreement, Trade Secrets are classified as Undisclosed Information and fall under the category of Intellectual Property Law, as outlined in Article 1(2) of Part I. Although the term 'Undisclosed Information' lacks a formal definition, its literal meaning refers to information kept hidden in order to gain a competitive economic edge. The TRIPS Agreement requires member countries to comply with Article 10bis of Paris Convention, with an emphasis on expanding its scope under Article 2(1) of Part I in Article 39.
Part II, Section 7 of the TRIPS Agreement, titled 'Protection of Undisclosed Information,' requires member countries to ensure the safeguarding of ‘Undisclosed Information’ under Article 39. This aims to establish an effective mechanism for combating unfair competition both within and across national borders. In contrast to the Paris Convention's ambiguity regarding 'dishonest practices,' the TRIPS Agreement defines conduct against sincere commerce practices as breaches of contract and confidence, inducement to such breaches, and knowingly or negligent acquisition of trade secrets.
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