Trade secret protection in India

Trade secrets in India have been recognized as, "information with commercial value which is not in the public domain and in relation to which the owner of the information has taken considerable steps to maintain confidentiality and secrecy." Even though trade secrets are not governed by any specific legislation in India, yet a protection regime exists whereby the rights of people owning the trade secrets may be safeguarded under appropriate circumstances. The trade secrets in India are therefore, protected through the Contract Law, Copyright Law, Information Technology Law, equitable doctrine of breach of confidentiality or unfair trade practices. Calcutta 1 High Court in Fairfest Media Ltd vs Ite Group Plc and Ors summarized the legal status of trade secret protection in India: "the essence of this branch of law whatever the origin it may be, is that a person who has obtained information in confidence is not allowed to use it as springboard for activities detrimental to the person who made the confidential communication.” The trade secrets' protection in India is approached on the basis of equity principle, breach of contractual obligations under common law, whereby if the owner has revealed the trade secret to another independent person for the purpose of running business in his absence, that person is not allowed to take advantage of it and involve in unfair trade practices. This necessitates that the employees who have access to trade secrets should be educated about the protection of trade secrets and be made to signe nondisclosure agreements (NDA). However, in John Richard Brady v. Chemical Process Equipments P. Ltd. and Ors.2, the Delhi High Court invoked a wider equitable jurisdiction, awarding an injunction in the absence of a contract. The Court held that,"independent of an underlying contract or in the absence of one, he who has received information in confidence is not allowed to take unfair advantage of it."

This lays down that undue enrichment at the expense or detriment of another goes against the tenets of equity and fairness which need not be dependent on contractual obligations.

In order to protect a valuable trade secret, it is essential that a strong trade secret protection be in place. For this, first of all a trade secret must be identified. Any know-how cannot be a trade secret. The Delhi High Court in the case of American Express Bank Ltd. v. Priya Puri3, has provided a list of what can be said to be a trade secret. As per this judgment, a trade secret "can be a formula, technical knowhow or a peculiar mode or method of business adopted by an employer which is unknown to others." However, routine affairs of the employer which are commonly in the knowledge of his employees and his competitors cannot be called trade secrets. Therefore, trade secrets must be well protected. Apart from maintaining secrecy, the employer must enter into a NDA with employees and any third party involved. Such restrictive covenants, aimed at protecting trade secrets are considered to be reasonable and nonconflicting with public policy during employment (Niranjan 4 vs Century ). They are not considered to be in restraint of 5 trade (Section 27, Indian Contracts Act, 1872 ) and are hence, not void. It must also be noted that agreements or contracts imposing restrictions on carrying on business by a former employee following termination of employment are generally considered to be in restraint of trade. However, in no case is a former employee allowed to take unfair advantage of the employer's trade secrets that are vital for its business. A former employee can also be restrained from "carrying (out) any activity which is competitive to that of company, and also from soliciting, interfering with, disturbing or attempting to disturb the relationship between the company or subsidiary and third party,including any customer or supplier of the company or subsidiary" (Kumar Apurva v. Valuefirst6). As can be observed, formulation of NDA or confidentiality agreement or employment contract can go a long way in providing protection to trade secrets. However, it is very important that these documents be drafted carefully. The NDA should clearly mention what information an employee can pass, or cannot pass, provision of termination due to breach of this agreement, and a clear, definition of "third party" to whom disclosure of information is banned. The employment contract must have a termination clause and a general clause on breach of contract, non-solicitation clause, theft of information etc. The contract should also specify that the employee is mandated to take reasonable steps to keep all the confidential information in confidence except and to the extent when disclosure is mandatory under any law in force. Further to ensure enforceability of NDA/ confidentiality agreements, the definition of the confidential material ought to be well defined and the names of the contracting parties should be clearly written to avoid all ambiguities. It must also be ensured that only the authorized person is signing the contract. Scope of the agreement must not be very broad, onerous or too anticompetition or else this may render the contract unenforceable. The context of the agreement, its terms and jurisdiction must be clearly defined. In case of an R & D unit, one should obtain a "document of ownership" signed by the scientist/engineer/technical person with a clause clearly stating that the ownership of IP generated by the person during his/her tenure of employment will rest with the company. Apart from NDA and confidentiality agreements, it is important that the company take certain initiatives to ensure protection of their vital trade secrets. These include restricting access of trade secrets to only those employees who may have a legitimate need to know it, marking trade secret containing documents as confidential and maintaining electronics and computer secrecy. In order to keep computer secrecy, a Data Protection policy must be in place so that employees can be made aware of data theft, tampering with computers and its consequences. Under the Information Technology Act 2000, tampering with computer systems can invite a fine of up to approximately 7 USD 1,40,000 under section 43 . These could also invite 8 imprisonment of up to 3 years under section 66 . Breach of 9 confidentiality and privacy is punishable under section 72 of the IT Act with imprisonment up to 2 years or fine or both. Disclosure of information in breach of lawful contract is punishable with imprisonment up to 3 years or fine or 10 both under section 72A . Also, one should be careful with unsolicited submissions. Further, there should be sufficient legal support on whatever policies needs to be put in place by the employer. A non-compete clause must also be inserted into any contract. Caution must also be taken while hiring new employees. A proper pre-screening must be carried out to rule out any criminal record, any wrongful act including money laundering, fraud, corruption etc. Similar due diligence must also be carried out before entering into any third party agreement. Even after taking due precautionary measures, one may face trade secret violation ending up in litigation. One of the major concerns then is that trade secrets may be made public during litigation in India. In an issue examined by a 9- 11 judge bench of the Supreme Court of India ; it has been held that for matters which lead to publication of secret processes, publication of which would destroy the very basis of the claim for relief etc., Courts may hold a trial in closed session and wholly exclude the public throughout the trial or a part thereof. The Delhi High Court has promulgated new Rules in November 2018 that allow 12 formation of a 'Confidentiality Club' during litigation .

The various acts constituting breach of confidence that are commonly accepted by the Indian Courts are:

the fact or the information must have quality of confidence in it; - there must be an obligation of confidence relating to such fact or information; - there must be an unauthorized use of that information to the detriment of the party communicating it. - there is a risk that, in the absence of an injunction, the owner will suffer irreparable loss and injury. Further, in order to seek relief from courts, not only the specific trade secrets must be identified but it also needs to be proved as to how the plaintiff had ownership of them. The nature and quality of information that has been misused must also be shown to be confidential in the 13 pleadings. In Ritika. v Biba , a suit was filed for infringement of the plaintiff's fabric designs, the Delhi High Court took the view that if an injunction order were sought with respect to trade secrets, the specific trade secrets would have to be mentioned, as well as how the plaintiff had ownership of them; only then would the court consider granting an injunction order. A general order in respect of an unspecified trade secret could not be passed against the defendant. Coming to the remedies, both civil and criminal remedies are available to the owner of the trade secrets in India. In case of a civil suit, an injunction against an unauthorized or illegal user can be obtained. However, the probability of obtaining an injunction from Indian courts is based on certain basic principles formulated in the Code of Civil Procedure 1908: - a prima facie case in favor of an injunction exists; - the balance of convenience is in favor of granting the injunction; The owner of the trade secret can also claim damages. Similarly, a criminal complaint may also be lodged alleging theft under section 378 of the Indian Penal Code (IPC) 1860. In order to satisfy the requirements of Section 378, the trade secret must have a physical form (e.g. client lists, formulae or blueprints) and must be proven to have actually been stolen. A complaint alleging criminal breach of trust under Section 408 of the IPC, read with section 420 alleging cheating, may also be initiated. However, the same would apply only in situations where an agreement (express or implied) of trust exists and has been Contributed by Dr. Anju Khanna contravened. Therefore, it can be seen that a myriad of options are available to the owner of a trade secret in India to be able to safeguard his trade secrets. India's position, thus, should not be mistaken to connote that insufficient protection is accorded to trade secrets and confidential information.

Contributed by Dr. Anju Khanna

BOLAR DOCTRINE- REGULATION AND SAFEGUARDS

Section 107A of the Patent Act, 1970, popularly known as India's "Bolar Exemption", is a defence for patent infringement, when the invention is used or sold by a third party for purposes related to research and development. The provision allows generic pharmaceutical companies to conduct research on a patented product while it is still valid.

India is the global leader in generics drug supply. It supplies 50 to 60 percent of global demand for many vaccines (including ARVs), 40 percent of generics consumed in the 2 US and 25 percent of all the medicines dispensed in the UK . Branded generics dominate the market in India, making up 3 for 70 to 80 per cent of the retail market . Hence this provision has always been in the limelight and also been a point of contention between proprietary and generic drug manufacturers. In a recent matter, the Delhi High Court pondered upon the provision and issues pertaining to permissibility of export under Bolar provision.

Bayer filed a suit to injunct Alembic and Natco Pharma from making, selling, distributing, advertising, exporting, offering for sale and in any manner directly or indirectly dealing in RIVAROXABAN and any product that infringed Bayer's patent IN 211300. An appeal was filed by Bayer (1) The patent granted; (2) The nature of the product or elements sought to be exported; (6) All particulars regarding the relevant regulations, against judgment of a single bench which had permitted Alembic to export the patented products for clinical trials for approval of drug from foreign regulatory authorities. The Division Bench (DB) upheld the order of the Ld. Single Judge allowing Alembic Pharmaceuticals Ltd. to export small quantities of Rivaroxaban. The DB held the sale of patented article within India or outside for research or experimental purposes under Bolar exemption constitutionally valid. However, the Court recognised that said provision is unregulated and prone to misuse. The Court laid down tests necessary to regulate the use of the Section 107A exemption to avoid future misuse and the inquiry and adjudication in such cases would be in regard to the following:

(1) The patent granted;
(2) The nature of the product or elements sought to be exported;
(3) The details of the party or party importing the product;
(4) The quantity sought to be exported;
(5) Other particulars with respect to the end use of the product, to establish that it is solely for research and development of information to regulatory authorities in the other country;
(6) All particulars regarding the relevant regulations,covering the kind and scope of inquiry, including the quantities of the product (i.e. the patented product or compound, API or fine chemical needed). These details must be supplied by the exporter/seller of the product to the overseas buyer. In case the defendant is not the seller, it should disclose who had purchased the product in the relevant quantities, to facilitate its impleadment in the proceedings. In the event it cannot do so, the consequences of such results ought to be considered by the court.;
(7) If the regulations are in the language of that country, an authentic English translation to facilitate a speedy resolution;
(8) Appropriate interim order, including undertaking by way of affidavit to compensate the plaintiff, in the event the suit was to be decreed and the extent of such monetary compensation. The affidavit should be of authorized personnel, and kept alive during the pendency of litigation, duly authenticated by the board of director or other controlling body of the defendant- and whenever the company or entity undergoes amalgamation or transfer, suitable undertaking from the successor organization;
(9) If necessary, verification through the Indian mission (and its trade division) abroad regarding the authentication of the third party and/or its facilities abroad;
(10) If it is held by the court that the exporter is not involved in sale or export of any patented product, but a generic article, unprotected by patent law, when denying relief, suitable restitutionary relief should be awarded to the defendants in monetary terms, to preclude litigation that prevents trade or competition;

Thus, the Courts have recognised that due to the unregulated nature of the provisions related to the exemption, further specific measures have be placed to monitor the misuse of the provision and to ensure that exports are genuinely made for research purposes only.

Contributed by Ms. Manika Arora

Overlap of IP rights: design and passing off rights

The overlapping of various IP's is an unresolved issue when it comes to the grant of remedies for their infringement. The overlap between design and trademark rights is one such issue that was waiting to be resolved. A design, which is obtained in early part of the life cycle of a product may acquire secondary meaning of a badge of origin, quality and repute of the product over a period of time. The design is then said to have acquired distinctiveness which is a pre-requisite of trade mark and hence starts to serve the purpose of a trademark. In this judgement, the Court clarified the position when the other party makes a similar or deceptively similar imitation of a design, this act not only amounts to design piracy under section 22 of the Design Act but is also liable for passing off action under the common law as it deceives the public into believing that the imitated product is associated with the original one and hence cutting on the former's revenue. The "Carlsberg" bottle had a registered design and due to its extensive use and marketing, the consumers started associating the bottle's appearance with the product origin, making it an indicator of the source and quality of the product. A suit was filed against the defendant for the Design piracy as well as Passing Off action.

In the present matter the bench adjudicated on important the issue of maintainability of composite suit in respect of piracy of registered design and passing off action for the Trade dress. Multiplicity of suits in respect of the same subject matter has also been one of concerns of the court. Resolving the matter, a five Judge Bench of the Delhi High Court held that design piracy as well as passing off action constitute two separate cause of actions in the fact that one infringes the right of the proprietor as guaranteed under the Design Act while the other causes injury by riding upon his reputation in the market and deceiving the customers by presenting anassociation with the same. It was held that separate suits are required to be filed for separate causes of action claiming different reliefs. The court held that acomposite suit in relation to infringement of a registered design and a passing off should be maintainable as on the same cause of action against the same Defendants, territorial jurisdiction made by the Plaintiff on one cause of action would be sufficient for the other. The bench addressed that composite suit has the advantage of abird's eye view by the Court with respect to a common set of facts. By reason of existence of common questions of law and/or fact between the causes of action ofinfringement of a registered design and passing off, to a large extent, the evidence of the two cause of action will also be common. In such scenarios, joinder of causes of action must be done in order to avoid multiplicity of proceedings.