A trade secret is any business information that is kept confidential to maintain an advantage
over competitors. As opposed to conventional forms of intellectual property such as patents
and designs that require public disclosure for grant of statutory rights, the value of a trade
secret lies in its confidentiality. If maintained carefully, a trade secret can potentially enjoy
perpetual protection.
Currently, India lacks specialised legislation for trade secrets protection, promoting
stakeholders to rely on contractual obligations to ensure confidentiality. Additionally, Indian
courts frequently apply common law principles related to equity and breach of confidence in
trade secret disputes.
Law Commission Report and Trade Secrets Bill, 2024
In March 2024, the 22nd Law Commission of India (LC) through its 289th Report titled ’Trade Secrets and Economic Espionage’, recommended the introduction of a sui generis legislation for trade secret protection in India. The report includes a draft of the ’The Protection of Trade Secrets Bill, 2024’ (Proposed Bill), comprising of 13 sections across 4 chapters.
Aligning with the provisions of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which mandates the protection of “undisclosed information” under Article 39, the Proposed Bill defines a trade secret as information that –
is not generally known or readily accessible within relevant circles
derives commercial value on account of being secret
has been subject to reasonable steps to maintain its secrecy
is likely to cause damage to the trade secret holder if disclosed
Section 3 of the Proposed Bill grants trade secret holders statutory right to use, disclose and license their trade secret. It also allows them to initiate legal proceedings to prevent the misappropriation of trade secrets. Misappropriation is defined as :
acquisition of a trade secret or related information without the consent through unauthorised access, appropriation, or copying
acquisition through conduct contrary to honest commercial practices
use or disclosure without consent by someone who acquired it unlawfully, breached confidentiality agreement, or violated any contractual duty
acquisition, use or disclosure by a person who knew or ought to have known the information was acquired through unlawful means
Exemptions and Provisions
Section 4 of the Proposed Bill outlines exemptions to misappropriation, including lawful acquisition through independent discovery, reverse engineering, or honest commercial practice. Section 5 exempts disclosure made to expose unlawful act, professional misconduct, or in good faith for public interest, aiming to protect whistleblowers who reveal dishonest practices.
An intriguing provision is Section 6, which interestingly empowers the Central Government to mandate the issuance of compulsory license to third parties or the government in case of national emergency or extreme urgency involving substantial public interest. This provision seeks to stifle monopolistic practices by ensuring fair, reasonable and non-discriminatory licensing terms for trade secrets. The impact of this provision, if retained in the final bill, will be significant and unique, as compulsory licensing for trade secrets is uncommon.
Observations
The LC’s Report, incorporating insights from the TRIPS agreement and various stakeholders, marks a positive step towards establishing India as a favourable hub for innovation and business. The formalisation of trade secret protection law would address the concerns of foreign investors who currently view India’s lack of effective protection mechanisms for business secrets and confidential information as a significant concern.
The Proposed Bill aims to balance the rights of the trade secret holders with the need for a fair idea and competitive market. If enacted, this legislation could enhance India's attractiveness as a destination for investment and innovation, providing robust protection for trade secrets while promoting transparency and ethical business practices.
In conclusion, the proposed draft of the Protection of Trade Secrets Bill, 2024, represents a pivotal development in India's intellectual property landscape. By providing a legal framework for the protection of trade secrets, the Proposed Bill aims to foster a more secure and dynamic business environment, ensuring that both domestic and international stakeholders can operate with confidence in the confidentiality of their proprietary information.
The opinions and views expressed in this content belong solely to the author(s).
