Introduction

Trade Secret

A trade secret is any information having commercial value, which is not in the public domain, and for which reasonable steps have been taken to maintain its secrecy. Trade secrets refer to confidential business information that provides a company with a competitive advantage and is kept secret from competitors. Unlike patents, trademarks, or copyrights, trade secrets are not publicly registered or disclosed. Instead, their value lies in their secrecy and the efforts taken by businesses to protect them. A trade secret agreement focuses especially on safeguarding the intellectual property that includes any formula, pattern, design, process, or other proprietary information that gives a business a competitive edge and adds value for customers.

Confidentiality Agreement

All non-public information or material disclosed or provided by one party to the other, either orally or in writing, or obtained by the recipient party from a third party or any other source, concerning any aspect of the business or affairs of the other party. A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a legally binding contract between two or more parties that establishes obligations to protect confidential information shared between them. A confidentiality agreement’s goal is to guarantee that secret or sensitive information and is not disclosed to unauthorized individuals or used for unauthorized purposes. Any information, including business and marketing data, customer data and lists, innovations, information pertaining to intellectual property, and information technology, is protected by a non-disclosure agreement.

Background

India joined the World Trade Organization (WTO) in 1991 following the liberalization, and The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which was signed in 1994, was also signed. All signatories to the TRIPS Agreement were obligated to protect trade secrets and other proprietary data in accordance with Article 39 of the TRIPS Agreement. There is still no clear legislation protecting sensitive information and trade secrets in India. It relies on common law and equity. With progress, the Indian government created the Draft of National Innovation Act 2008 and special regulations to safeguard trade secrets. All of the trade secret protection regimes were specified in the Bill, but as the Bill did not receive sufficient support to become an Act, the protective step was never taken.

How Trade Secrets And Confidentiality Agreements Are Governed In India

As mentioned above there is no legislation that governs trade secrets in India. These rules may, according to the circumstances in any given case, either rest on the principles of equity, that is to say the application by the Court of the need for conscientiousness in the course of conduct, or by the common law action for breach of confidence, which is in effect a breach of contract. The governing process is discussed as follows:

Common Law

1. 1. Parties are bound not to disclose information contrary to the terms of the contract between the parties(non- disclosure agreement)
   2. Trade secrets contained in corporate data are likewise protected by copyright law. A specialist regulatory framework for the Protection and Privacy of Data of Personal and Non-personal Data in whatever form (digital or non-digital) was also introduced by the Personal Data Protection Bill, 2019 (PDPB).
   3. A fine is imposed for violating confidentiality and privacy under Section 72 of the Information Technology Act of 2000.
   4. The Indian Penal Code, 1860, deals with cases of criminal breach of trust in sections 405 through 409.

Confidentiality Law And Fiduciary Relationship

In the absence of a non-disclosure agreement between the parties, the recipient of information disclosed by one party to another party in a trustee-beneficiary relationship abides by the duty of confidence and trust.

Judicial Caselaw

Since there is no explicit legislation in India for the protection of trade secrets and confidential information, judicial judgements and precedents are the main sources. The cases mentioned below show how the judicial mind was applied in the following situations:

1. The Calcutta High Court issued an injunction order against the former workers of a legal firm in Sudipta Banerjee Vs. L.S. Davar & Company & Ors. FMAT 735 of 2021 for exposing trade secrets and sensitive information obtained during their employment. If we reexamine Section 27 of the Indian Contract Act, the court further stated that freedom of contract and trade must be balanced. It would be unethical and a violation of the service contract’s confidentiality agreement for the employee to divulge such information and communications, which would be detrimental to the legal firm.
2. M/s Lifecell International Private Limited  v. Vinay Katrela O.A. Nos. 599 and 600 of 2018.The Madras High Court held in the current case that a franchisee agreement or any other arrangement cannot contain an absolute restraint after an employee’s employment has ended. The Court also ruled that the prohibition could only apply to Trade Secrets that were created and suited to the company’s future plans and could not, therefore, be disclosed.
3. In the case of Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber, 61 (1995) DLT 6,the defendant—a former employee of the plaintiff—used the plaintiff’s database of contacts to launch a competing firm. The contacts database was created by the plaintiff with skill and effort, according to the court, and is therefore protected by the statute governing trade secrets and confidential information.
4. Principles of secrecy were initially discussed in the case of John Richard Brady & Ors v. Chemical Process Equipment P Ltd & Anr (AIR 1987 Delhi 372). “The law on this subject does not depend on any implied contract,” the court ruled. Whoever has received knowledge in confidence shall not use it unfairly, according to the general norms of equity.

Suggestions And Opinion

In this democratic and capitalist world, manufacturing and business sectors are the crucial wheels of any democratic country, so their protection should be the priority to any country as they play the crucial role in development of any country. Trade secrets and confidential agreements also promote trust and collaboration between businesses. When companies enter into confidential agreements, they can share sensitive information with each other, such as in joint ventures or research and development partnerships, knowing that their trade secrets will be protected. This encourages collaboration and knowledge sharing, which can lead to advancements in various industries. The legal protection provided by trade secret laws and confidential agreements enables businesses to engage in these partnerships with confidence, knowing that their valuable information will remain secure.. Any unique style, method, innovation that help that business to grab the market competition should be protected by the government. For that to happen there should be certain legislation to regulate these protection policies. Just like, USA have – The Uniform Trade Secrets Act (USTA) which is a state law enacted by the Uniform Law Commission in 1979 to protect trade secrets, UK have Trade Secrets (Enforcement, etc) Regulations, 2018 to protect trade secrets, japan have The Unfair Competition Prevention Act (UCPA), India should also pass legislation to regulate protection of trade secrets and confidentiality and a separate government body to regulate these laws among all the native and overseas companies.

Conclusion

Every company, organisation, and business should adhere to secrecy management, employee employer contracts, non-disclosure agreements, and any other reasonable measures to protect trade secrets. Global advancements in the protection of trade secrets and confidential information have given nations like the US and Japan an advantage over other nations in running profitable firms. It’s important for businesses to understand the legal requirements and best practices for protecting trade secrets in their respective jurisdictions. Consulting with intellectual property lawyers or legal experts can help businesses develop strategies to safeguard their trade secrets and take appropriate legal action if misappropriation occurs. Trade secrets and confidential agreements serve as vital tools for businesses to protect their intellectual property, maintain a competitive edge, and foster collaboration. They offer legal mechanisms to safeguard sensitive information and promote innovation. However, it is important to strike a balance between protecting business interests and ensuring a fair and competitive marketplace. By navigating this delicate balance, trade secret and confidential agreement laws can effectively support businesses while promoting innovation, collaboration, and the broader public interest.

References

Web Article

1. a)William R. Walker,CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT,EX99.(E)(8)3dex99e8 https://www.sec.gov/Archives/edgar/data/1065246/000119312509046323/dex99e8.htm
2. George H.W. Bush, Canadian Prime Minister Brian Mulroney, and Mexican Pres. Carlos Salinas de Gortari, North American Free Trade Agreement,Official Gazette of the Federation, December 8, 1994, http://www.sice.oas.org/trade/nafta/chap-172.asp#:~:text=Article%201711%3A%20Trade%20Secrets&text=A%20Party%20may%20require%20that,films%20or%20other%20similar%20instruments.

Books
a)Visheshwar Dayal Kulshreshtha, 0f contracts, voidable contracts and void agreement, The Indian Contract Act, 1872(commercials),pg 14, section 27.

Cases
a) Dr. Sudipta Banerjee Vs. L.S. Davar & Company & Ors. FMAT 735 of 2021
b)M/s Lifecell International Private Limited v. Vinay Katrela O.A. Nos. 599 and 600 of 2018.
c)Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber, 61 (1995) DLT 6,
d)John Richard Brady & Ors v. Chemical Process Equipment P Ltd & Anr (AIR 1987 Delhi 372).

•  Article 1711 of North American Free Trade Agreement
•   EX-99.(E)(8) 3 dex99e8
•  Article 39 of the TRIPS Agreement
•  John Richard Brady & Ors v Chemical Process Equipment P Ltd & Anr (AIR 1987 Delhi 372)
•  Section 27 of the Indian Contract Act
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