Trade-Secret: Definition and Meaning

People in business, trade and manufacturing are entitled to have full protection of their confidential information against piracy and misuse. Such information is covered under ‘Trade Secret’ relating to their financial management, inventive administrative procedures which contribute to efficiency in production and value addition.

What is the Meaning of Trade-Secret?

In legal term, one category of intellectual property is known as a trade secret. What differentiates your product or service from others on the market is a quality that is not well known outside of your company.

It is beneficial because it enables you to differentiate your service or product from those offered by competitors. The subject matter of trade secrets is defined in broad terms and may include manufacturing processes, distribution methods, advertising strategies, sales methods, consumer profiles, and lists of suppliers and customers.

Examples of Trademark

Manufacturing secrets, industrial secrets, and commercial secrets are all examples of trade secrets.

There are many different kinds of information and procedures that can be classified as trade secrets.

The following are some examples of common commercial secrets −

• Methods that transform raw materials into other types of materials that can be utilized.

• Recipes for various types of foods and foodstuffs.

• Manufacturing processes for various types of goods for consumers.

• Formulas for cleaning products and other products that are chemically similar to those products.

• Technological procedures, such as computer programme procedures or scripts.

It is absolutely necessary for companies to protect their trade secrets by taking steps both consciously and consistently. The use of contracts as a means of protecting one's trade secrets is, in most cases, the best way to avoid engaging in litigation regarding one's trade secrets. You need to insist that anyone who has access to your confidential information signs a legally binding agreement promising not to reveal it.

Is Trade-Secret needs to be registered?

A trade secret, in contrast to a patent, can be protected for an indefinite period of time and does not require any registration or other formalities to do so. However, in order for confidential information to be regarded as a trade secret, certain requirements must first be fulfilled. Despite the fact that the following conditions are found in a variety of nations, there are some universal standards:

• The information must remain confidential (i.e. not generally known among, or readily accessible to, circles that normally deal with the kind of information in question).

• Given that the information is kept a secret, its commercial value must be significant.

• It is necessary for the information to have been the subject of reasonable steps taken by the rightful holder of the information in order to keep it secret, such as through the use of confidentiality agreements.

Historical Background

Trade secrets were first incorporated into Indian law in 1977, after Coca-Cola withdrew from the Indian market in response to the then-demand government that they turn over their secret formula. At the time, the government demanded that the company reveal their secret formula. After a ten-year absence, Coca-Cola eventually came back after a new administration took office.

Later, in the year 1991, India decided to implement a liberalisation programme that boosted the significance of both domestic and international investment. Both the World Trade Organization and the Agreement on Trade-Related Aspects of Intellectual Property Rights (also known as TRIPS) were ratified by India in the year 1994. (WTO).

Nevertheless, in spite of India's objections, the term "Trade Secret" was included in the final wording of the TRIPS Agreement. As a consequence of this, member states were required to protect trade secrets in accordance with Article 39 of the TRIPS Agreement. After that, India passed new laws in order to comply with the terms of the TRIPS Agreement. However, it did not pass any particular legislation pertaining to trade secrets because it believed that its existing laws were sufficient for complying with Article 39 of the agreement (Trade Secrets).

The Indian government drafted the National Innovation Bill, 2008, in response to an increase in the number of "Trade Secrecy" cases that were brought before Indian courts. This bill included a number of other provisions in addition to a number of provisions that were specifically linked to "Trade Secrecy." This can essentially be regarded as India's first attempt to introduce legislation specifically addressing trade secrets, as it is the country's first attempt to do so. This piece of legislation defined a number of terms, including "confidential information," "misappropriation," and "misappropriator." In addition to this, it included specific clauses such as Confidentiality Obligations, Confidentiality Arises from Non-Contractual Relationships, Remedies to Protect and Preserve Confidentiality, Orders to Prevent Threatened or Apprehended Misappropriation of Confidentiality, and many others. However, this bill went missing and was never presented to the Parliament for consideration.

It was not until 2016 that the United States Trade Representative (USTR) Ambassador Michael Froman and the then-Indian Minister of Commerce and Industry Ms. Nirmala Sitharaman met for the tenth ministerial-level meeting of the India and United States Trade Policy Forum. During this time, India maintained its silence on the Trade Secret issue, which lasted for approximately 8 years (TPF).

However, in the section of the National Intellectual Property Policy, 2016 that discusses the future legislative agenda, the phrase "Protection of Trade Secrets" was only mentioned in passing, without any additional explanation being provided.

Why has it become so important to protect Trade Secrets?

Theft of trade secrets is made more likely by factors such as the size and scope of investments and the amount of international competition.

Nowadays, businesses ensure that their most sensitive business and operational information is kept hidden from their rivals, who might be able to use that knowledge to their advantage. Recent years have seen a rise in the importance of protecting trade secrets as a result of the high stakes involved in an increasingly competitive age. The fact that there has been an increase in the number of cases involving trade secrets brought before the courts in the past few years makes this conclusion rather intuitive.

The formula for Coca-Cola, the chemical make-up of Listerine mouthwash, and even McDonald's Maharaja Mac's special sauce are all examples of trade secrets. These are just a few of the many types of trade secrets that exist. Although these are just a few examples, it is the recipe that differentiates them from their rivals, which is why protecting their trade secrets has become such an important topic in recent years.

Some of the main reason to protect trade secret is given under below −

• Massive investments

• The free flow of information

• Alterations in the attitudes of workers

• Globalization

How Long Does the Right to Protect a Trade Secret Last?

Trade secrets, in contrast to copyrights and other forms of intellectual property, are not required to be registered with any governmental organisation. Contracts, non-disclosure agreements, non-compete forms, and other documents that are very similar to one another are typically what are used to ensure the protection of trade secrets. These provide guidelines for individuals who may have been exposed to information regarding the trade secret, with the goal of discouraging those individuals from disclosing that information to anyone who might share it with the company's competitors.

The individual's ability to communicate the information with others is typically restricted under the terms of a contract or agreement designed to protect the trade secret, which enables the trade secret to continue to be kept a secret.

As a result, the conditions governing the protection of trade secrets ought to be made abundantly clear in the terms of the contract. Due to the fact that there is no formal procedure for the registration of trade secrets, the termination of the protection must be explicitly stated in any written documents that are involved, if there is to be any termination. In most cases, the owner of a trade secret will lose the legal protection afforded to them as well as any exclusive rights that pertain to the secrets if the secret is made known to the general public or is no longer considered to be confidential.

Conclusion

In today's world, there is an immediate demand for the implementation of procedures that will streamline the operations involving information that constitutes a trade secret. Consequently, declarativeness and complexity are the primary characteristics of the legal protection of trade secrets. To begin, the formation of a singular conceptual framework that may be applied to any and all legislative acts adopted or taken in this sphere has been suggested as a first step. Second, the law should establish a single list of specified information with a certain ratio, implementation mechanisms, and establishment of responsibility for violation of restrictions on access to information, as well as mechanisms for changing modes of limited access to it. In addition, the law should establish mechanisms for changing the modes of limited access to it.

It is necessary to formalise the protection of commercial secrets within the framework of civil law. Everyone is responsible for having a profound awareness that every trade secret belongs to its owner, and that trade secrets are not permitted to be divulged without the owner's prior permission. A trade secret ought to be treated as a kind of unwritten law, the foundations of which must not be weakened in any way.

FAQs

Q1. What laws govern the confidentiality of business information and trade secrets in India?

Ans. In India, there is neither a statute nor any other type of legislation that governs the protection of commercial secrets. On the other hand, rights in regard to trade secrets can be enforced through contract law (Indian Contract Act, 1872), principles of equity, or by way of a common law action for breach of confidence.

Q2. Do Trade-Secret expires?

Ans. Since there is no legal way to register or claim your trade-secret, there is no way for the trade secret to expire.