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‘Trade Secret’- Key to Ultimate Success?

By October 26, 2021No Comments

Every Intellectual Property (IP) generated by a business entity has its own significance. Amongst them, the key that makes the venture more lucrative is its trade secrets. Does “Coca Cola’s Secret Formula” ring any bells? Well, a Trade Secret can be any formula, method, ingredient or business information that is kept highly confidential in order to maintain a conspicuous advantage over competitors. For instance, the famous KFC ‘Original Recipe’ developed by Colonel Sanders in 1940 remains one of the highly protected trade secrets in the world. The handwritten recipe is now guarded in a safe in Kentucky while the knowledge of the same is protected by various legal means like Non-Disclosure Agreements and Confidentiality Clauses. Through this article, let’s peruse why trade secrets hold significance and what other methods can be used to protect them.

Need for Trade Secret Protection

As stated above, the trade secret is any piece of information so crucial that it becomes the ‘ace of spades’ with respect to the success of the enterprise. But what other factors are involved in something being labeled as a ‘Trade Secret’?

Internationally, the Trade Related Aspects of Intellectual Property rights discusses Protection of Undisclosed information under Article 39 of the Agreement. The TRIPS agreement broadly lays down the requirements for Trade secret protection as- 1. Secrecy, 2. Commercial or Economic value to the holder; and 3. Efforts taken by the holder to maintain secrecy of the information.

In the Indian context, the Bombay High Court expanded the definition of the concept in the case of Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh. It said that any information can be termed as trade secret based on the following factors:

  1. Scope of Knowledge: which is the extent to which the information is known outside the business;
  2. Conscientiousness of Workers: determined by the extent to which it is known to those inside the business, i.e., by employees;
  3. Duty of Care by Business: the precautions taken by the holder of the trade secret to guard the secrecy;
  4. Edge over Rivals: The savings affected and the value to the holder in having the information as against competitors;
  5. Profitability: The amount of effort or money expended in obtaining and developing the information;
  6. Uniqueness: The amount of time and expense it would take others to acquire and duplicate the information.

India harbors monopolistic competition in most markets. In spite of that, the government does not offer any statutory recognition towards trade secrets. The jurisprudence on Trade Secrets in India developed at an increasing pace ever since the 1990s; owing to the liberalization of the economy and a significant increase in creation of intellectual property having financial implications on businesses. Consequently, the change in the economic climate was also responsible for bringing disputes before Indian courts which then proved to be the breaking ground for an understanding behind the classification of information, especially in its intangible form and the circumstances in which such information is required to be protected. Recognizing the intrinsic value and vulnerability of trade secrets, courts in India, have generally upheld trade secret protection.

Critical Analysis

In the light of the legally and demographically restrictive circumstances that prevail in India on a deeper level than other countries, major enterprises that employ the usage of trade secrets find themselves with a need of innovating their security measures while protecting them. With the ever-increasing paucity in individual and corporate privacy, the secrecy factor of trade secrets needs a much more tangible degree of protection. Something that potential infringers cannot get access to without authority.

Fortunately, the means and methods of IP protection in place are suitable to a very substantial degree in this current situation. Let’s observe a few general methods through which Trade Secrets can be converted into patents, designs and trademarks etc.

  1. Exclusive Business Rights (EBRs) via Patents – If any business operates in an area where the knowledge of a key element is necessary for the produced goods and services to be made available to the consumers, by virtue of which they stand to potentially monopolize that specific area of market; such knowledge can be protected by not only patenting the knowledge but also the entire business product/service. For example, the design and rights of developing a new type of automobiles in the future or methods of fermenting wine and distillation of different types of new liquor can be patented so that it can only be created and commercialized under that specific name, with respect to both personal and professional use. An illusionist’s tricks, for that matter can be patented by them and the rights to perform the said trick exclusively can too be laid claim to, in order to secure unimpeded monopoly over one’s own invention and its practical usage. However, patent is at a disadvantage to Trade Secrets, because beyond the 20 years term of protection granted to patents, the subject matter will eventually fall into the public domain. Moreover, in order to obtain a patent, the inventor must disclose the invention in a way that enables others to understand it.
  2. Usage of Traditional Knowledge – In a lot of cultures around the globe, the use of indigenous resources for medicinal, culinary, manufacturing, scientific research and many other purposes is prevalent. Predominantly, such resources exist either in the eastern, south-eastern or the tropical parts of the globe. Japan’s use of traditional knowledge due to their extensively rich natural diversity and their ancient and highly developed civilization of knowledge provides them an opportunity to capitalize by developing innovative methods through experimentation and research, primarily in the field of Human Resource Management and the culinary arts. Similarly, the plethora of ancient knowledge that Indian and Chinese civilizations harbor can also be used to harness resources that are elusive and only available in the geographical vicinity of the two nations.

Any existing or future organization that discovers use of these natural resources through substantial experimentation and initiate a mass production of these potentially game-changing resources, thus building a clear goodwill in the market; may easily lay claim towards being the sole commercial beneficiary from such a development via right of process patenting and trademarks.

Conclusion

As the world becomes virtually smaller, the need for preventions of trade secrets being misused is ever-growing. Parallel to that, the ever-echoing cry for sustainable development continues to press on with the tangible scarcity of natural resources. The only upside to this situation is the collective human resource available to humanity at large. Narrowing down India’s position in such a tightly competitive world; even though the domain of trade secret protection in India is limited, business ventures of all scales have managed to preserve and exploit their USPs simultaneously at critical junctions. The Indian economy was said to be of a mixed nature at its inception but due to the advent of factors like foreign direct investment, inflation and population increase, it is slowly shifting towards a capitalist setup. In such a daunting scenario, all players in the market will look to fortifying their strategy by using innovative use of intellectual property. The scope of use and the need of protection of trade secrets in the same spectrum will become even more paramount.

Therefore, the reasonable flexibility of the general and specific laws related to intellectual property will pave the way towards ideas of innovation and usage of trade secrets combined with expressly recognized IPs such as patent and designs in India. Do reach us out at photon.ip@photonlegal.com to know more about keeping your trade secret safe and protecting IP throughout the process of business development.

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