Trade Secrets

What are Trade Secrets?

It is information which is used in the course of a trade which needs to be kept secret by the business organizations which own that information. This is done to have a competitive edge over other market players. Trade secrets do not fall under the traditional categorization of intellectual property like patent, trademark, copyright, etc. Trade secrets help Indian businesses to make their products better than competitors. It helps to keep their products unique and of a different quality from other competitors. Also, trade secrets are maintained to prevent unfair practices like piracy, etc. Trade secrets are the reason for the success of a business for e.g. secret recipe of KFC’s food, Coca-Cola’s formula for making soft drinks, etc.

There is no specific definition of a trade secret under Indian laws. So the Indian courts follow the definition of US Trade Secrets Act passed in 1970 as well as the definition provided under Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Under the TRIPS agreement, it has been written as “undisclosed information”. So, it can be said the trade secret is that information which holds commercial value, which is not in the public domain and the owner takes reasonable steps to keep the information secret.

Conditions for an information to be termed as Trade Secrets

There are conditions for information to be termed as a trade secret:

  • Commercial value: like the other intangible assets like goodwill, it holds economic value, profitability to a business. It should give an economic edge.
  • Not in the public domain: it should be exclusively held by that particular organization not necessarily to all the people in the organization, only the key members of the business.
  • Reasonable steps to keep it secret: these steps should be taken to keep it secret. Once it is in the public domain then it loses its value. Reasonable steps include Non-disclosure agreements with the members and employees of the company.

Role of TRIPS Agreement in providing protection to trade secrets

TRIPS provides protection under Article 39 to trade secrets. It was the first international agreement to accord protection to trade secrets expressly. The approach of the agreement is that in order to prevent unfair competition protection should be provided to undisclosed information. In presenting this approach TRIPS Agreement makes reference to the prior existing protection against unfair competition under the Paris Convention (Art. 10bis) for the protection of Industrial property. It is administered by WIPO.

For a trade secret to have any practical value the owner must share it in order to collaborate with employees and business partners. So, the law provides for the sharing of information in a constraint circle. So even the trade secrets are not secret in the strictest sense they must remain nonpublic and known only to a limited no. of people.

Thus, the definition of trade secret is broadly similar among countries that address their dual nature as commercial but confidential. Hence, it is an intellectual property that has commercial value because of which it has an interface with unfair competition which a portion of the anti-trust law.

This article is authored by Aditi Bharadwaj, student at the Institute of Law, Nirma University.

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