Rough draft- Protection of trade

secrets and traditional knowledge

Submitted to
Submitted by
Mr. Pawan Kr. Pandey
Satyendra kumar maurya

[Link].B(Hons.) – VII sem

Roll no. -110

Introduction:-

A trade secret refers to data or information relating to the business which is not generally known
to the public and which the owner reasonably attempts to keep secret and confidential. Trade
secrets generally give the business a competitive edge over their rivals. Almost any type of data,
processes or information can be referred to as trade secrets so long as it is intended to be and
kept a secret, and involves an economic interest of the owner. For example, a business may have
certain internal business processes that it follows for its day-to-day operations that give it an
edge over its competitors. This could be regarded as a trade secret.
The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS)
under the auspices of the World Trade Organisation lays down the following three criteria for
regarding any information as undisclosed information (or trade secrets):
 It must not be generally known or readily accessible by people who normally deal with
such type of information
 It must have commercial value as a secret
 The lawful owner must take reasonable steps to keep it secret.

Customer lists, business information, employee details, financial records, data compilations,
business plans and strategies, formulae, designs, drawings, algorithms et al, could all amount to
trade secrets. It is important to bear in mind that a trade secret need not be something that is
novel nor should it have any real or intrinsic value to be protected. The only important
requirement is that it must be a secret.

Trade Secrets as Distinguished from Trade Knowledge

In the employment context, the courts have found that certain information gained by a person
during employment may fall within the area of trade knowledge, which is different from trade
secrets or confidential information and not protectable as such.1 An employee is free to take trade
knowledge from job to job and any restrictive covenant purporting to stop a departing employee

1
See Pizza Pizza Ltd. v. Gillespie (1990), 75 O.R. (2d) 225 (Gen. Div.); Genesta Manufacturing Ltd. v. Babey (1984), 48 O.R.
(2d) 94 (H.C.J.) [Genesta].
from using this trade knowledge is prima facie an illegal restraint on trade and, therefore,
unenforceable.2

Trade knowledge is typically distinguished from trade secrets and other confidential information
as being the skills, general knowledge and any personal goodwill that an employee obtained in
the course of employment.3

The Nature of Confidential Information and Trade Secrets

The terms “trade secrets” and “confidential information” have been used somewhat
interchangeably by the courts. “Trade secrets” generally refers to information relating to more
technical matters such as secret processes or formulas; and “confidential information” relates to
non-technical matters such as business plans or pricing information. 4 Although this paper uses
the term “confidential information” to encompass trade secrets, note that the courts have not
always treated these terms consistently.5

How can confidential information be protected?

The general law relating to breach of confidence prohibits an ex-employee from using
information which can be identified as the property of his/her ex-employer and separate from the
employee’s original knowledge. However, the general law does not prevent employees acting in
concert from leaving their employer and setting themselves up in competition with the employer.
Moreover, there is no rule of law or equity that restrains a company or individual from seeking
out a competitor’s employees and offering them employment, provided that there is no breach of
the employees’ service. Therefore, although the disclosure of confidential information per se may
be protected, confidential information may be leaked in any of the foregoing ways. It is
recommended that an employer enter into restrictive covenants with the employee embodying
the aforesaid points. A covenant, covering clearly defined activities in which the employee would
be likely to use confidential information, relieves the employer of the need to prove that the
employee subjectively appreciated the confidentiality of the information in question, or that the
information was separable from the employee’s general trade knowledgenesses must ensure that
they protect their trade secrets from being misappropriated, sabotaged, lost or stolen. Some tools
that they can adopt are outlined herein below:

2
Maguire v. Northland Drug Co., [1935] S.C.R. 412 [Maguire].
3
See Berkey Photo (Canada) Ltd. v. Ohlig (1983), 76 C.P.R. (2d) 121 (H.C.J.); Herbert Morris Ltd. v. Saxelby, [1916] 1 AC 688
(H.L.), cited with approval in Apotex Fermentation Inc. v. Novopharm Ltd. (1995), 63 C.P.R. (3d) at 146 (Man. Q.B.) [Apotex
Fermentation].
4
See M.D. Manson, “What are trade secrets, and how are they different from confidential information and intellectual
property?” in R.A. Fashler et al., eds., Trade Secrets and Confidential Information (Vancouver: The Continuing Legal
Education Society of British Columbia, 2002) 1.1 at 1.1.02 [Manson].
5
Note also the English case of Faccenda Chicken Ltd. v. Fowler, [1986] 1 All E.R. 617 (C.A.) [Faccenda Chicken],
  Employment agreement: Depending upon their needs, businesses should include suitable
confidentiality, non-disclosure and non-compete clauses in agreements with employees.
These may include the type of information that is likely to be disclosed, the manner in
which it should be used and restrictions on disclosure post-termination.

 Trade Secret Policy: Such a policy is a must for businesses that heavily rely on their trade
secrets. A basic step to develop such a policy is to identify and prioritize the business
secrets based on their value and sensitivity. Employees must be informed about the
policy and consequences of its breach before they agree to abide by the policy and sign
an acknowledgement to that effect.

 Non-disclosure Agreements (NDAs): Businesses can also enter into NDAs with third
parties while discussing any business prospects and ventures. In this way, the third parties
can be precluded from divulging any trade secrets.

 Adequate Documentation: It is important for businesses to keep a track of the trade

secrets that are developed and have sufficient records to show that the trade secret was
developed by them and belongs to them. These records would be of evidentiary value in
case of a dispute. It would also be useful for such businesses to conduct a trade secret
audit at regular intervals to and keep up to date with any changes.

 Security Systems: Access to trade secrets and confidential information may also be
restricted to only select personnel who have to undergo proper security checks. In case of
an electronic environment, the businesses should use adequate software programs, virus
scans, firewalls and other security and authentication technologies to safeguard their trade
secrets.

Paris Convention And Undisclosed Information

Article 10bis of the Paris convention says that:

(1) The countries of the Union are bound to assure to nationals of such countries effective
protection against unfair competition.
(2) Any act of competition contrary to honest practices in industrial or commercial matters
constitutes an act of unfair competition.
(3) The following in particular shall be prohibited:
(i) all acts of such a nature as to create confusion by any means whatever with the establishment,
the goods, or the industrial or commercial activities, of a competitor;
(ii) false allegations in the course of trade of such a nature as to discredit the establishment, the
goods, or the industrial or commercial activities, of a competitor;
(iii) indications or allegations the use of which in the course of trade is liable to mislead the
public as to the nature, the manufacturing process, the characteristics, the suitability for their
purpose, or the quantity, of the goods.

However, though, Article 10 bis(3) do not include the wrongful misappropriation of trade secrets
or confidential information, the protection of industrial and business- secrets is implied by the
general obligation under Article 10 bis(1) and (2).so, prior to TRIPS, international IP law
recognized that Acts contrary to honest business practices must be prohibited.

Besides the above legal provisions for the protection of trade secret, the European Convention on
Human Rights, 1950 stipulates, in its Article 8, that everyone has the right to respect for his
private and family life, his home and his correspondence. But this is not absolute right. It is
subject to legally sanctioned interference for various reasons including for “the protection of the
rights and freedoms of others” . The World Intellectual Property Organization has also taken
various initiatives to protect trade secrets from unauthorized users.

Legal Framework in India

There is no specific law in India that protects trade secrets and confidential
information. Nevertheless, Indian courts have upheld trade secret protection on basis of
principles of equity, and at times, upon a common law action of breach of confidence, which in
effect amounts to a breach of contractual obligation.
In India it is possible to contractually bind a person not to disclose any information that
is revealed to him/her in confidence. In one case, the Delhi High Court has also upheld that a
claim that disclosure of information would amount to breach of confidence is not defeated by the
fact that other people in the world already knew the information. The Supreme Court of India
(i.e. the apex court) has also upheld a restrictive clause in an employment contract, which
imposed constraints on the employee to not reveal or misuse any trade secrets that he or she has
learnt whilst in employment.
The remedies available to the owner of trade secrets would be to obtain an injunction preventing
a third party from disclosing the trade secrets, return of all confidential and proprietary
information, and compensation for any losses suffered due to disclosure of trade secrets.

Property in Confidential Information

Characterizing confidential information as property is controversial. 6 For purposes of the theft
provisions in the Criminal Code,7 confidential information is not property.8 The Court
in Cadbury Schweppes emphasized that actions for breach of confidence are rooted in the
relationship of confidence rather than in the characteristics of the information involved.

It can be useful to think of confidential information and trade secrets as being capable of being
controlled rather than owned. Use or dissemination of such information can be controlled
through contractual means or through other obligations implied by law without necessarily
asserting property rights. In the employment context, there is also an implied condition of
employment that an employee who learns of an invention or discovery, including a trade secret,
becomes a trustee of that discovery for his or her employer even beyond the term of
employment.9

NATIONAL RESPONSES TO THE DEBATE ON TRADITIONAL KNOWLEDGE:-

Most countries do not have adequate materials or mechanisms for protecting traditional
knowledge. The value of the knowledge has prompted national efforts to legislate on traditional
knowledge at different jurisdictions. The object of this part is to highlight the various methods
used for such a protection to enable other countries to follow in these footsteps. This part
discusses the attempts and the salient features of the legislative actions in the various
jurisdictions.
A. PHILIPPINES-
The Philippines was the first nation to legislate (Indigenous Peoples’ Rights Act, 1997) to
“protect and promote the rights of indigenous cultural committees/indigenous people.”[Link]
Act recognizes “community property”257 and advocates that the state shall set up necessary
mechanisms to protect the culture and identity of the indigenous people.
B. INDIA-
In India, where the awareness of intellectual property law is very low, the momentum towards
protection of the indigenous properties increased after the texmati269-turmeric270 and neem271
disputes. The WTO and its “drug denying obligations” (high prices of drugs on account of
product patent regime) served to increase this awareness.
C. THAILAND-
Thailand introduced legislation to protect the knowledge of the traditional healers and medicinal
resources from private appropriation by pharmaceutical companies.283 Multinational
corporations influence farming in Thailand on account of pesticides and insecticides. They

6
Cadbury Schweppes, supra note 5.
7
R.S.C. 1985, c. C-46, s.322.
8
R. v. Stewart, [1988] 1 S.C.R. 963.
9
Triplex Safety Glass Company v. Scorah, [1937] 4 All E.R. 693 (Ch. D.), cited with approval inR.I. Crain, supra note 6 at para.
7
succeeded in getting two Bills passed. One was passed by the Ministry of Agriculture and
Cooperatives, and the Ministry of Commerce passed the other.
D. AFRICA
In February of 2000, a proposal to incorporate African traditional medicine into the National
Policy Plan for Africa was accepted.289 The recommendations stressed the importance of
strengthening the quality of rural health care by exploring, encouraging, and improving the use
of traditional plant-based medicines, on which a large proportion of the African population still
depends for effective, low-cost health care.

Conclusion : Prevention is better than cure

As businesses are growing out of their parochial moulds and going global, effective trade secret
protection is becoming a necessity. Though there is no enactment in India that affords protection
to trade secrets, businesses can use the tools mentioned above to safeguard these trade secrets.
Businesses must remember that adequate and effective creation, protection, use and management
of trade secrets are crucial factors in determining their success.