HOW TRADE SECRETS AFFECTS THE BUSINESS

Sharad Yadav

Abstract:

This article explains the term ‘trade secret’ and how it is different from the patent. This article also explains how trade secret affects the business. The article goes on to the length of explaining the Limitation of trade secret in business organization with the help of Case laws related to the trade secret.

Introduction:

Firstly, we will try to understand what a trade secret is.

Tradesecretis information/process/method which is used by acompanyin the running of their business andthe one which is not known by the public. Itdoes not need to be very complicated and it may be a simple information but the condition is that it is not known by the public.

According to Uniform Trade Secrets Act[1]:

“Trade secret” means information, including a formula, pattern, compilation, program, device,

method, technique or process that: (1) derives independent economic value, actual or potential,fromnot being generally known to, and not being easily ascertainable by proper means, by other personswho can obtain economic value from its disclosure or use, and (2) is the subject of efforts that arereasonable under circumstances to maintain its secrecy.

Trade secret is too considered confidential even if it is known by the employee of the companybut should be not known by the public.

Difference Between Patent and Trade secrets:

For getting patent you have to register your product at patent office whereas in trade secrets you do not have to register for it.
Patents have a limited length of protection, while trade secrets have no time restrictions.
Patent gives the patent holder a right to exclude others from making, selling, using or importing the invention. Whereas the trade secret helps in protecting from the misappropriation.

Limitation of trade secret:

If information is common then it cannotbe considered as a trade secret
In case of Ambiance India Pvt. Ltd. vs Shri Naveen Jain[2]

It was recognized in this case that “a trade secret is some protected and confidential information which the employee has acquired in the course of his employment and which should not reach others in the interest of the employer. However, routine day-to-day affairs of employer which are in the knowledge of many and are commonly known to others cannot be called trade secrets.

CASES:

With the increasing competition among the competition among companies. Every company tries to protect their confidential information. Trade secret is a very important aspect for any company. Manytimes, it happens that company employee after the termination of service uses the data of the company which is illegal because data is protected under trade secret. One of the best regarding trade secret is come under

The Delhi High Court, in Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber[3]declared that acomputer database consisting of a compilation of clients and their addresses was to be protected asa literary work under the law of copyright. The Plaintiff, a mail order company, had compiled a list ofclients and customers over a three-year period.The Defendant obtained a copy of the database and was using it to contactplaintiff’scustomers. The High Court held that the databasecould be protected as a literary work

There are also cases where a company tries to restraint its employees to do job while they are in the service. Sometimes they also put the clause that within one, two or three years after the termination of service they cannot work any other places. This issue is also raised in a very famous case

In V.N. Deshpande v. Arvind Mills Co. Ltd.[4]the appellant agreed to serve in the exclusive

employment of the respondent company for a period of three years and during the said term not totake the employment of anyone else as a weaving master in any part of India. After one year, theappellant left the company and joined Mills as a weaving thecourt restrained the appellant from serving elsewhere in breach of the negative covenant containedin the agreement and held that the agreement was not unreasonably wide or in restraint of tradeand was hence enforceable. The question whether a particular agreement was unreasonablywide had to be decided by the nature of the agreement, and theservice he had to render along with the places where the employee could get alternative service ofthe same nature. It was a fit case for granting aninjunction.

Conclusion:

Trade secret is a very important aspectfor any type ofbusiness. Without this, it is very hard for a company to be in a good position because itprotects company confidential information about the product and the information which is not known by the public. From time to time from different cases tell us how trade secret is as much important as patent for the company. Company cannot prevent any person from doing a job in any other company by saying that person knows company trade secret if a company do so then it will be a violation of Section 27 of the Indian Contract Act[5] which states thatAgreement in restraint of trade, void.—Every agreement by which anyone is restrained from exercising a lawful trade or business of any kind, is to that extent void. —every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.”

Routine day-to-day affairs of employers which are in the knowledge of many and are commonly known to others cannot be called trade secrets. It should be only known by a few people to be considered as trade secret.i.e coca-cola secret formula which is known by only two people.

Reference

http://www.uniformlaws.org

https://www.wipo.int/

http://www.legalservicesindia.com/article/620/Trade-Secrets-as-an-Intellectual-Property-Right-Under-Indian-Law.html

https://indiankanoon.org/